Includes abstract. / Includes bibliographical references (leaves 114-116). / Although Fuzzy Logic is not new, it is however only since 2004 that an axiomatic theory has been created that has all the desirable effects of Fuzzy Logic. This theory, named Credibility theory was proposed by Dr. Liu. Within this thesis we aim to utilize credibility theory to model the psychological impacts of market participants on European options. Specifically this is done by modifying the approach that was originally taken by Black and Scholes. The Hew model, which is known as the fuzzy drift parameter model, begins by replacing the deterministic drift within Brownian motion with a fuzzy parameter. This fuzzy parameter models the psychological impacts of market participants. Naturally as we are dealing in Chance theory 1 the risk neutral dynamics change from that of Black and Scholes and thus so does the price of European call options.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uct/oai:localhost:11427/4924 |
| Date | January 2008 |
| Creators | Ramsden, Bevan |
| Contributors | Guo, Renkuan |
| Publisher | University of Cape Town, Faculty of Science, Department of Mathematics and Applied Mathematics |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Master Thesis, Masters, MSc |
| Format | application/pdf |
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