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Binomial models for option valuation - examining and improving convergence

1996
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Applied Mathematical Finance
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Binomial models, which rebuild the continuous setup in the limit, serve for approximative valuation of options, especially where formulas cannot be derived mathematically. E v en with the valuation of European call options distorting irregularitiesoccur. For this case, sources of convergencepatterns are explained. Furthermore, it is proved order of convergence one for the Cox{Ross{Rubinstein 79]model as well as for the tree parameter selections of Jarrow and Rudd 83], and Tian 93]. Then, we de

doi:10.1080/13504869600000015
fatcat:3src7elozzhqxaas3ozqmhz22u