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Fuzzy uncertainty in the heston stochastic volatility model

Author

Listed:
  • Figà-Talamanca, G.

    (Department of Economics, Finance and Statistics. University of Perugia.)

  • Guerra, M.L.

    (Department Matemates. University of Bologna.)

  • Stefanini, L.

    (Department of Economics, Politics and Society. University of Urbino.)

Abstract

Stochastic volatility models for option pricing are suitable to explain many empirical stylized facts in financial markets. Among the other models, Heston provides a good analytical tractability because a quasi closed formula for the price of a European call option can be derived. The estimation of the Heston model parameters is nowadays a subject of on-going research; the aim of this paper is to manage uncertainty about parameters through fuzzy logic preserving the probabilistic structure of the Heston model.

Suggested Citation

  • Figà-Talamanca, G. & Guerra, M.L. & Stefanini, L., 2011. "Fuzzy uncertainty in the heston stochastic volatility model," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), vol. 0(2), pages 3-19, November.
    • Handle: RePEc:fzy:fuzeco:v:xvi:y:2011:i:2:p:3-19
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    Citations

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    Cited by:

    1. Maria Letizia Guerra & Laerte Sorini & Luciano Stefanini, 2015. "Option prices by differential evolution," Working Papers 1511, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2015.
    2. Maria Letizia Guerra & Laerte Sorini & Luciano Stefanini, 2013. "Value function computation in fuzzy models by differential evolution," Working Papers 1311, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.

    More about this item

    Keywords

    fuzzy numbers; parametric representation; stochastic volatility; sensitivity analysis;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

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