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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