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European barrier option pricing formulas of uncertain currency model

  • Fuzzy systems and their mathematics
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Abstract

Foreign currency has been a dynamic instrument in financial market, and currency option has become a momentous hedging tool in foreign exchange market. Additionally, the barrier option, which spends less than ordinary options, is increasingly favored by investors in foreign exchange market. Different from the existing pricing methods, this paper aims to price European barrier options of uncertain currency model, in which the exchange rate is viewed as an uncertain process. The pricing formulas are given for the barrier currency options including two knock-in options and two knock-out options, respectively. Finally, the numerical experiments are presented to illustrate the use of formulas and the impact of parameters on option prices.

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Notes

  1. Here we set a new barrier level to distinguish the curve under different K.

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Acknowledgements

This work was supported by National Natural Science Foundation of China (Nos. 71771011 and 72071008).

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Authors and Affiliations

  1. School of Economics and Management, Beihang University, Beijing, 100191, China

    Jie Deng

  2. Key Laboratory of Complex System Analysis, Management and Decision (Beihang University), Ministry of Education, Beijing, 100191, China

    Zhongfeng Qin

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  1. Jie Deng
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  2. Zhongfeng Qin
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Correspondence to Zhongfeng Qin.

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Deng, J., Qin, Z. European barrier option pricing formulas of uncertain currency model. Soft Comput 25, 8653–8663 (2021). https://doi.org/10.1007/s00500-021-05808-z

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