Smooth convergence in the binomial model (Q2463704)

The authors study the rate and smoothness of the convergence of the European call option price given by the binomial model to the Black-Scholes price as the number of periods tends to infinity, with particular emphasis on the smoothness. They consider the standard binomial model but with correction, that is, a bounded sequence. This sequence allows to achieve smooth convergence and to calculate the asymptotic of a digital call option and of a European call option. The main tool in the proof is is an extension of a classical result of Uspensky on the approximation of the binomial distribution by the normal one.