Pricing European and American Options with Extrapolation
Date Issued
2003
Date
2003
Author(s)
Chen, Chao-Jung
DOI
20060927122850289384
Abstract
This thesis deals with European and American options with tree methods via
extrapolation and provides an e fficient methodology.Binomial and trinomial trees
are widely used in numerical methods for derivatives pricing and applicable across
a wide range of option types.However,convergence to the correct option price is
oscillatory and nonmonotonic.This situation makes the tree method inaccurate and
unsuitable for extrapolation.We fix the problem by pegging the strike price in the
CRR method and make it applicable for extrapolation.
Subjects
Option pricing
extrapolation
binomial tree
sawtooth effect
Publisher
國立台灣大學財務金融學系
Type
report
File(s)![Thumbnail Image]()
Loading...
Name
thesis_r90723064.pdf
Size
350.75 KB
Format
Adobe PDF
Checksum
(MD5):4b376fee672474a40570eb4bad5654e2