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Fuzzy Interest Rate Term Structure Equation

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Abstract

Interest rate is an important part of option pricing model, which attracts many scholars’ attention. In this paper, the fuzzy interest rate model is established under the framework of credibility theory, and the fuzzy term structure equations of zero coupon bonds and coupon bonds are derived. In order to solve the fuzzy term structure equations, the conditions of bond price possessing affine term structure in fuzzy environment is verified. As an illustration, based on a special fuzzy interest rate model, the pricing formula of zero coupon bond is obtained by using the fuzzy term structure equation and affine term structure.

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Acknowledgements

This work was supported by Natural Science Foundation of China, Grant No. 61773150.

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Authors and Affiliations

  1. College of Mathematics and Information Science, Hebei University, Baoding, 071002, China

    Le Bo & Cuilian You

  2. Hebei Key Lab of Machine Learning and Computational Intelligence, Hebei University, Baoding, 071002, China

    Cuilian You

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  1. Le Bo
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  2. Cuilian You
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Correspondence to Cuilian You.

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Bo, L., You, C. Fuzzy Interest Rate Term Structure Equation. Int. J. Fuzzy Syst. 22, 999–1006 (2020). https://doi.org/10.1007/s40815-020-00810-3

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  • DOI: https://doi.org/10.1007/s40815-020-00810-3

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