Fuzzy uncertainty in the heston stochastic volatility model

Gianna Figà-Talamanca, Maria Guerra and Luciano Stefanini ()

Fuzzy Economic Review, 2011, vol. XVI, issue 2, 3-19

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.

Keywords: fuzzy numbers; parametric representation; stochastic volatility; sensitivity analysis (search for similar items in EconPapers)
JEL-codes: C02 G17 (search for similar items in EconPapers)
Date: 2011
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