Improving speed of convergence for the prices of European options in binomial trees with even numbers of steps

DOI10.1016/j.amc.2010.03.111zbMath1194.91195MaRDI QIDQ984281

Xiao-Yong Xiao

Publication date: 19 July 2010

Published in: Applied Mathematics and Computation (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.amc.2010.03.111

zbMATH Keywords

rate of convergence; European option; higher order convergence; binomial models

Mathematics Subject Classification ID

91G60: Numerical methods (including Monte Carlo methods)

65M06: Finite difference methods for initial value and initial-boundary value problems involving PDEs

91G20: Derivative securities (option pricing, hedging, etc.)

Related Items

WHAT A DIFFERENCE ONE PROBABILITY MAKES IN THE CONVERGENCE OF BINOMIAL TREES, A q -binomial extension of the CRR asset pricing model, Can high-order convergence of European option prices be achieved with common CRR-type binomial trees?, Option convergence rate with geometric random walks approximations

Cites Work

• The rate of convergence of the binomial tree scheme
• Smooth convergence in the binomial model
• Achieving smooth asymptotics for the prices of European options in binomial trees
• Binomial models for option valuation - examining and improving convergence
• Asymptotics of the price oscillations of a European call option in a tree model
• ACHIEVING HIGHER ORDER CONVERGENCE FOR THE PRICES OF EUROPEAN OPTIONS IN BINOMIAL TREES
• Option pricing: A simplified approach
• The Minimal Entropy Martingale Measure and the Valuation Problem in Incomplete Markets