PROCEEDINGS IPMU '08

Fuzzy Term Structure Equation

Rui Liang, Jie Zhang, Jinwu Gao.

The term structure model describes
the evolution of the yield curve
through time, without considering
the influence of risk, tax, etc. Recently,
the fuzzy process was initialized
and applied to option pricing.
Under the assumption of fuzzy interest
rate, this paper investigates the
term-structure equation. The equation
is first derived for valuing zero-coupon
bond. Analytic solution of
the fuzzy interest rate equation is
given when the process for interest
rate is the fuzzy counterparts of the
Vasicek model.

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