Implied trinomial trees and their implementation with XploRe

DOI10.1007/BF03354608MaRDI QIDQ1424653zbMATH OpenFDO

Authors Karel Komorád

Publication date 16 March 2004

Published in Computational Statistics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/BF03354608

zbMATH Keywords

diffusion processdiscrete approximationfinancial softwareoption pricingvarying local volatility

Mathematics Subject Classification ID

Applications of statistics to actuarial sciences and financial mathematics (62P05) Statistical methods; economic indices and measures (91B82)

Review text

The implied trinomial tree (ITT) is a technique of discrete approximation of a diffusion process with varying local volatility. It is used for the solution of the option pricing problems. The author discusses the construction of ITT and possible pitfalls. Examples of XploRe software implementations of ITT technique are presented.

Recommendations

• Building recombining trinomial trees for time-homogeneous diffusion processes
• Pricing options based on trinomial Markov tree
• Lattice approach and implied trees
• Convergence of the trinomial tree method for pricing European/American options
• Numerics of Implied Binomial Trees

Cites work

• scientific article; zbMATH DE number 1777932 (Why is no real title available?)
• scientific article; zbMATH DE number 1869203 (Why is no real title available?)
• Implied trinomial trees and their implementation with XploRe
• XploRe® - Application Guide

Cited in

(3)

• Implied trinomial trees and their implementation with XploRe
• Building recombining trinomial trees for time-homogeneous diffusion processes
• Numerics of Implied Binomial Trees

Describes a project that uses

Uses Software

• XploRe

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