Looking Forward to Pricing Options from Binomial Trees
General Physics
2007-05-23 v2 Condensed Matter
Abstract
We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. This reformulation allows us to write closed-form expressions for the value of European and American put barrier-options on a non-dividend-paying stock.
Cite
@article{arxiv.physics/0008111,
title = {Looking Forward to Pricing Options from Binomial Trees},
author = {Dario Villani and Andrei E. Ruckestein},
journal= {arXiv preprint arXiv:physics/0008111},
year = {2007}
}
Comments
12 pages, 1 figure