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Fuzzy Optimization of Option Pricing Model and Its Application in Land Expropriation

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  • Aimin Heng
  • Qian Chen
  • Yingshuang Tan

Abstract

Option pricing is irreversible, fuzzy, and flexible. The fuzzy measure which is used for real option pricing is a useful supplement to the traditional real option pricing method. Based on the review of the concepts of the mean and variance of trapezoidal fuzzy number and the combination with the Carlsson‐Fuller model, the trapezoidal fuzzy variable can be used to represent the current price of land expropriation and the sale price of land on the option day. Fuzzy Black‐Scholes option pricing model can be constructed under fuzzy environment and problems also can be solved and discussed through numerical examples.

Suggested Citation

  • Aimin Heng & Qian Chen & Yingshuang Tan, 2014. "Fuzzy Optimization of Option Pricing Model and Its Application in Land Expropriation," Journal of Applied Mathematics, John Wiley & Sons, vol. 2014(1).
    • Handle: RePEc:wly:jnljam:v:2014:y:2014:i:1:n:635898
    DOI: 10.1155/2014/635898
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    References listed on IDEAS

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    1. Geske, Robert, 1979. "The valuation of compound options," Journal of Financial Economics, Elsevier, vol. 7(1), pages 63-81, March.
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