Kalpana Kalpana (Editor)

Fuzzy number

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A fuzzy number is a generalization of a regular, real number in the sense that it does not refer to one single value but rather to a connected set of possible values, where each possible value has its own weight between 0 and 1. This weight is called the membership function. A fuzzy number is thus a special case of a convex, normalized fuzzy set of the real line. Just like Fuzzy logic is an extension of Boolean logic (which uses absolute truth and falsehood only, and nothing in between), fuzzy numbers are an extension of real numbers. Calculations with fuzzy numbers allow the incorporation of uncertainty on parameters, properties, geometry, initial conditions, etc.

Applications

  • A method for asset valuation that uses fuzzy numbers in investment analysis and real option valuation
  • References

    Fuzzy number Wikipedia