Solving systems of linear fuzzy equations
Fuzzy Sets and Systems
Fuzzy Sets and Systems: Theory and Applications
Fuzzy Sets and Systems: Theory and Applications
Pricing European options based on the fuzzy pattern of Black-Scholes formula
Computers and Operations Research
Fuzzy linear systems of the form A1x+b1=A2x+b2
Fuzzy Sets and Systems
Investment project valuation based on a fuzzy binomial approach
Information Sciences: an International Journal
Investment project valuation using a fuzzy real options approach
ISTASC'10 Proceedings of the 10th WSEAS international conference on Systems theory and scientific computation
Investment appraisal under uncertainty - a fuzzy real options approach
ICONIP'10 Proceedings of the 17th international conference on Neural information processing: models and applications - Volume Part II
A fuzzy real option approach for investment project valuation
Expert Systems with Applications: An International Journal
Pricing and hedging in a single period market with random interval valued assets
International Journal of Approximate Reasoning
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The aim of this paper is to price an American option in a multiperiod binomial model, when there is uncertainty on the volatility of the underlying asset. American option valuation is usually performed, under the risk-neutral valuation paradigm, by using numerical procedures such as the binomial option pricing model of Cox et al. [J.C. Cox, S.A. Ross, S. Rubinstein, Option pricing, a simplified approach, Journal of Financial Economics 7 (1979) 229-263]. A key input of the multiperiod binomial model is the volatility of the underlying asset, that is an unobservable parameter. As it is hard to give a precise estimate for the volatility, in this paper we use a possibility distribution in order to model the uncertainty on the volatility. Possibility distributions are one of the most popular mathematical tools for modelling uncertainty. The standard risk-neutral valuation paradigm requires the derivation of the risk-neutral probabilities, that in a one-period binomial model boils down to the solution of a linear system of equations. As a consequence of the uncertainty in the volatility, we obtain a possibility distribution on the risk-neutral probabilities. Under these measures, we perform the risk-neutral valuation of the American option.