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

DOI10.1016/j.amc.2010.03.111zbMath1194.91195OpenAlexW2080746557MaRDI 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 convergenceEuropean optionhigher order convergencebinomial models

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (4)

A q -binomial extension of the CRR asset pricing model ⋮ WHAT A DIFFERENCE ONE PROBABILITY MAKES IN THE CONVERGENCE OF BINOMIAL 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

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

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