What is it about?
Despite there is a great deal of literature on fuzzy option pricing, the existence of empirical studies about the application and performance of fuzzy option models with real data is not usual. So, we firstly propose a way to quantify fuzzy parameters from empirical data to implement FBS. Subsequently we evaluate the suitability of FBS to predict actual traded prices of options in Spanish financial market.
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Why is it important?
We find that FBS fits quite well actual traded prices. However, generally most representative market prices (closing and medium) are not better fitted than those more extreme (minimum and maximum). We have also check that the goodness of the FBS predictions often depends on the moneyness grade and the expiration date of options.
Perspectives
In our opinion, the main contribution of this paper is that test empirically the closeness of fuzzy Black and Scholes option model to actual market data. As we have shown in the introduction, there is a wide research field that consists in adapting option pricing models to fuzzy data but also a lack of empirical studies on this topic. So, a natural extension of this research may extend the empirical evidence about FBS to option markets of other countries. Another future research direction may consist in testing with real data other fuzzy option pricing models that are supported from more sophisticated hypothesis on the stochastic process that governs subjacent asset or are developed for less usual option styles than European or American.
Jorge de Andrés Sánchez
Universitat Rovira i Virgili
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This page is a summary of: An empirical assestment of fuzzy Black and Scholes pricing option model in Spanish stock option market, Journal of Intelligent & Fuzzy Systems, September 2017, IOS Press,
DOI: 10.3233/jifs-17719.
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