Fuzzy uncertainty in the heston stochastic volatility model
G. Figà-Talamanca. University of Perugia
M.L. Guerra. University of Bologna
L. Stefanini. University of Urbino
- Fuzzy Economic Review: Volume XVI, Number 2. November 2011
- DOI: 10.25102/fer.2011.02.01
Abstract
Stochastic volatility models for option pricing are suitable to explain many empirical stylized facts in financial markets. Among the other models, Heston provides a good analytical tractability because a quasi closed formula for the price of a European call option can be derived. The estimation of the Heston model parameters is nowadays a subject of on-going research; the aim of this paper is to manage uncertainty about parameters through fuzzy logic preserving the probabilistic structure of the Heston model.