Study On Fuzzy Rainbow Asian Options Pricing

This paper focused on the pricing problem of Rainbow Asian Option. As one of the most popular exotic options in financial market in recent years, the pricing formula of Rainbow Asian Option was already constructed in [11] based on Wiener process, but suffering the rigidity of the choice of parameters, this formula has not gotten as much attention in the application in real investment.Noting this problem, we assume all these parameters including the risk-free interest rate, volatility and correlations between different underlying stocks are fuzzy numbers, and based on Liu process(see [5]), we proposed the fuzzy pricing model for Rainbow Asian Option. Our model is more proper to the real market, as the financial market is fluctuation from time to time. Therefore, we believe that our model can achieve great successes in the real financial market.Under the fuzzy parameters assumptions, the Rainbow call and put Asian Option price will turn into a fuzzy numbers. Then we used fuzzy sets theory as proposed in [17] to analyse the lower and upper bound such fuzzy number.This will make the financial analyst who can pick any reasonable Rainbow Asian Option price with an acceptable belief degree for his/her later financial analysis. As we can know, our work is pioneering, there is no literature analysing the bound of the fuzzy Rainbow Asian Call and Put Option price before.