Binary option pricing formulas for fuzzy financial market based on the exponential Ornstein-Uhlenbeck model

Document Type : Research Paper

Authors

1 Hebei University

2 College of Mathematics and Information Science, Hebei University, Baoding , China

Abstract

Binary option is an exotic option which is popular in Over the Counter market for hedging and speculation. According to their different payoff, there are two types of binary options, that is, cash-or-nothing and asset-or-nothing option. This paper investigates the fuzzy financial market based on the exponential Ornstein-Uhlenbeck model and derives binary option pricing formulas. In order to better understand the mathematical properties of these formulas, we give a few numerical examples and some figures to illustrate the changes of binary option price with different parameters when others are fixed.

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Main Subjects

References

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Iranian Journal of Fuzzy Systems
Volume 20, Issue 4
July and August 2023
Pages 81-95

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