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A new method to solve fuzzy stochastic finance problem

Author

Listed:
  • Jayanta Kumar Dash
  • Sumitra Panda
  • Golak Bihari Panda

Abstract

Purpose - The authors discuss the value of portfolio and Black–Scholes (B–S)-option pricing model in fuzzy environment. Design/methodology/approach - The B–S option pricing model (OPM) is an important role of an OPM in finance. Here, every decision is taken under uncertainty. Due to randomness or vagueness, these uncertainties may be random or fuzzy or both. As the driftµ, the degree of volatilitys, interest rater, strike pricekand other parameters of the value of the portfolioV(t), market priceS_0 (t) and call optionC(t) are not known exactly, so they are treated as positive fuzzy number. Partial expectation of fuzzy log normal distribution is derived. Also the value of portfolio at any timetand the B–S OPM in fuzzy environment are derived. A numerical example of B–S OPM is illustrated. Findings - First, the authors are studying some various paper and some stochastic books. Originality/value - This is a new technique.

Suggested Citation

  • Jayanta Kumar Dash & Sumitra Panda & Golak Bihari Panda, 2021. "A new method to solve fuzzy stochastic finance problem," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 49(2), pages 243-258, February.
    • Handle: RePEc:eme:jespps:jes-10-2020-0521
    DOI: 10.1108/JES-10-2020-0521
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