Advanced Modeling and Optimization

Abstract for Paper 7 of Volume 4, Number 1, 2002, pp. 83-91


Fuzzy credible degree pricing method for contingent claim in finite security market with linear programming


Chong-Feng Wu
School of Management,
Shanghai Jiao Tong University,
Shanghai 200030, P.R.China
Xue-Zhi Qin
School of Management,
Shanghai Jiao Tong University,
Shanghai 200030, P.R.China

Abstract

We present a kind of fuzzy credible degree pricing method for contingent claim, taking into consideration transaction costs in finite security market, by applying trapezoidal fuzzy set to characterize the uncertainty of the securities' and the contingent claim's expected prices in the future, and by utilizing the complete hedging and self-financing technique. The corresponding price of the contingent claim can be obtained through solving some linear programming problems.