On an implicit assessment of fuzzy volatility in the Black and Scholes environment

In this work we suggest a methodology to obtain the membership of a non-observable parameter through implicit information. To this aim we profit from the interpretation of membership functions as coherent conditional probabilities. We develop full details for the well known Black and Scholes pricing...

Full description

Saved in:
Bibliographic Details
Published in:Fuzzy sets and systems 2013-07, Vol.223, p.59-71
Main Authors: Capotorti, Andrea, Figà-Talamanca, Gianna
Format: Article
Language:English
Subjects:
Assessments
Coherent conditional probability assessments and extension
Conditional probability
Fuzzy
Fuzzy logic
Fuzzy membership elicitation
Fuzzy set theory
Implicit information
Markets
Mathematical models
Probability–possibility transformation
Volatility
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In this work we suggest a methodology to obtain the membership of a non-observable parameter through implicit information. To this aim we profit from the interpretation of membership functions as coherent conditional probabilities. We develop full details for the well known Black and Scholes pricing model where the membership of the volatility parameter is obtained from a sample of either asset prices or market prices for options written on that asset.
ISSN:0165-0114
1872-6801
DOI:10.1016/j.fss.2013.01.010