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Option pricing formulas for uncertain financial market based on the exponential Ornstein–Uhlenbeck model

Author

Listed:
  • Lanruo Dai

    (Renmin University of China)

  • Zongfei Fu

    (Renmin University of China)

  • Zhiyong Huang

    (Renmin University of China)

Abstract

Uncertain finance is an application of uncertainty theory in the field of finance. This paper investigates the uncertain financial market based on the exponential Ornstein–Uhlenbeck model. European option pricing formulas and American option pricing formulas are derived via the $$\alpha $$ α -path method. Finally, some mathematical properties of the uncertain option pricing formulas are discussed.

Suggested Citation

  • Lanruo Dai & Zongfei Fu & Zhiyong Huang, 2017. "Option pricing formulas for uncertain financial market based on the exponential Ornstein–Uhlenbeck model," Journal of Intelligent Manufacturing, Springer, vol. 28(3), pages 597-604, March.
    • Handle: RePEc:spr:joinma:v:28:y:2017:i:3:d:10.1007_s10845-014-1017-1
    DOI: 10.1007/s10845-014-1017-1
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    References listed on IDEAS

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    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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    Cited by:

    1. Yang, Xiangfeng & Zhang, Zhiqiang & Gao, Xin, 2019. "Asian-barrier option pricing formulas of uncertain financial market," Chaos, Solitons & Fractals, Elsevier, vol. 123(C), pages 79-86.
    2. Gao, Yin & Jia, Lifen, 2021. "Pricing formulas of barrier-lookback option in uncertain financial markets," Chaos, Solitons & Fractals, Elsevier, vol. 147(C).
    3. Yang, Xiangfeng & Liu, Yuhan & Park, Gyei-Kark, 2020. "Parameter estimation of uncertain differential equation with application to financial market," Chaos, Solitons & Fractals, Elsevier, vol. 139(C).
    4. Pan, Zeyu & Gao, Yin & Yuan, Lin, 2021. "Bermudan options pricing formulas in uncertain financial markets," Chaos, Solitons & Fractals, Elsevier, vol. 152(C).
    5. Lidong Zhang & Yanmei Sun & Ziping Du & Xiangbo Meng, 2021. "Uncertain strike lookback options pricing with floating interest rate," Review of Derivatives Research, Springer, vol. 24(1), pages 79-94, April.
    6. Liu, Z. & Yang, Y., 2021. "Selection of uncertain differential equations using cross validation," Chaos, Solitons & Fractals, Elsevier, vol. 148(C).
    7. Liu, Yang & Lio, Waichon, 2024. "Power option pricing problem of uncertain exponential Ornstein–Uhlenbeck model," Chaos, Solitons & Fractals, Elsevier, vol. 178(C).

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