On the relation between binomial and trinomial option pricing models
Haas School of Business, University of California, 2000 - 10 pages
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ABSTRACT This paper alternative parameterization Berkeley Binomial and Trinomial binomial tree Brennan Brennan/Schwartz BUSINESS AND ECONOMIC Capital Structure conditions consistent binomial model convergence Cox/Ross/Rubinstein and Jarrow/Rudd Derivatives Dynamic elapsed time H estimate sets exp(a2h explicit finite difference Finance Working Paper Financial and Quantitative finite difference method finite difference model free to require Haas School Hakansson INSTITUTE OF BUSINESS interval H Jarrow Journal of Financial Kamrad Kamrad/Ritchken trinomial model logarithmic transformation Lyons Mark Rubinstein Matthew Spiegel Michael model has exactly natural to ask Nils H node Optimal Option Pricing Models option value PAPER SERIES paper shows payout period of elapsed Program in Finance recent review Relation Between Binomial require equation Research Program return discrete Richard Risk Management risk-neutral riskless return Ritchken Ross Rudd SCHOOL OF BUSINESS September 1998 simply skipped standard option suitably parameterized theorem tree produced trinomial method Trinomial Option Pricing University of California value Q