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A currency exchange rate model with jumps in uncertain environment

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Abstract

Uncertain differential equation is an important tool to deal with the currency exchange rate problems in uncertain environment. Considering the fierce drifts of the exchange rate, this paper proposes a currency model by using the uncertain differential equation with jumps. The uncertainty distribution of the exchange rate is calculated, based on which a European currency option pricing formula for the currency model is derived. In order to calculate the currency option numerically, an algorithm is designed, and its effectiveness and efficiency are illustrated via some numerical experiments.

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Authors and Affiliations

  1. School of Business, Renmin University of China, Beijing, 100872, China

    Xiaoyu Ji

  2. School of Statistics, Capital University of Economics and Business, Beijing, 100070, China

    Huishan Wu

Authors
  1. Xiaoyu Ji
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  2. Huishan Wu
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Corresponding author

Correspondence to Huishan Wu.

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Funding

This study was funded by Capital University of Economics and Business for Academic Research Fund 2015 (Grant No. 00591554410253) and National Natural Science Foundation of China (Grant No. 71171191).

Conflict of interest

The author declares that she has no conflict of interest.

Ethical approval

This article does not contain any studies with human participants performed by any of the authors.

Additional information

Communicated by V. Loia.

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Ji, X., Wu, H. A currency exchange rate model with jumps in uncertain environment. Soft Comput 21, 5507–5514 (2017). https://doi.org/10.1007/s00500-016-2141-y

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  • DOI: https://doi.org/10.1007/s00500-016-2141-y

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