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International Journal for Uncertainty Quantification
IF: 4.911 5-Year IF: 3.179 SJR: 1.008 SNIP: 0.983 CiteScore™: 5.2

ISSN Print: 2152-5080
ISSN Online: 2152-5099

Open Access

International Journal for Uncertainty Quantification

DOI: 10.1615/Int.J.UncertaintyQuantification.2018025270
pages 543-557

PRICING ASIAN OPTIONS IN AN UNCERTAIN STOCK MODEL WITH FLOATING INTEREST RATE

Weiwei Wang
School of Science, Nanjing University of Science and Technology, Nanjing 210094, China
Ping Chen
School of Science, Nanjing University of Science and Technology, Nanjing 210094, China

ABSTRACT

Option pricing has always been an important issue in the financial field. Unlike the classical stochastic theory, we investigate the valuation of Asian options under the assumption that the risk factors are described by uncertain processes. Early researchers have presented some uncertain stock models to simulate the financial market. In this paper, we propose a new uncertain stock model with floating interest rate, where the process of interest rate is assumed to be the uncertain counterpart of the Cox-Ingersoll-Ross (CIR) model. Subsequently, Asian option pricing formulas of the proposed model are derived and some mathematical properties of the formulas are studied. Finally, some numerical algorithms are designed to calculate the prices of Asian options and some numerical examples are performed.


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