A European option general first-order error formula

DOI10.1017/S1446181113000254MaRDI QIDQ2865142zbMATH OpenFDO

Authors Guillaume Leduc

Publication date 28 November 2013

Published in The ANZIAM Journal (Search for Journal in Brave)

zbMATH Keywords

European optionsBlack-Scholes modelapproximation schemeerror formula

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Applications of statistics to actuarial sciences and financial mathematics (62P05) Numerical methods (including Monte Carlo methods) (91G60)

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• Option convergence rate with geometric random walks approximations
• Error estimates for the binomial approximation of American put options
• Expansion formulas for European options in a local volatility model
• Is the approximation rate for European pay-offs in the Black-Scholes model always \(1/\sqrt n\)?
• Convergence of barrier option prices in the binomial model

Cites work

• Achieving higher order convergence for the prices of European options in binomial trees
• Achieving smooth asymptotics for the prices of European options in binomial trees
• Asymptotics of the price oscillations of a European call option in a tree model
• Binomial approximation of Brownian motion and its maximum
• Binomial models for option valuation - examining and improving convergence
• Brownian optimal stopping and random walks
• Convergence of barrier option prices in the binomial model
• Error estimates for the binomial approximation of American put options
• Exercisability Randomization of the American Option
• On the convergence from discrete to continuous time in an optimal stopping problem.
• On the rate of convergence of the binomial tree scheme for American options
• Optimal convergence rate of the explicit finite difference scheme for American option valuation
• Optimal stopping and embedding
• Optimal stopping with random intervention times
• Option pricing: A simplified approach
• Pricing the American put option: A detailed convergence analysis for binomial models
• Smooth convergence in the binomial model
• The optimal-drift model: an accelerated binomial scheme
• The rate of convergence of the binomial tree scheme

Cited in

(7)

• A q -binomial extension of the CRR asset pricing model
• The randomized American option as a classical solution to the penalized problem
• Convergence rate of regime-switching trees
• Can high-order convergence of European option prices be achieved with common CRR-type binomial trees?
• Option convergence rate with geometric random walks approximations
• What a difference one probability makes in the convergence of binomial trees
• Strong approximation of Black-Scholes theory based on simple random walks

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