Application Fuzzy Simulation to Evaluate Option

Abstract

The current work attempts to evaluate the option from a novel perspective, fuzzy simulation technique, one of the evolutionary computational approaches. This paper proposes a random fuzzy jump-diffusion option pricing model, where the volatility and the jumps intensity are depicted as fuzzy variables, respectively. Fuzzy simulation technique is designed to estimate the membership degree and the expected value of the option. The rough figures of the expected value of option can be obtained. Finally, the application of the methodology is demonstrated by a numerical example.