I've been trying to find a formula to obtain the maximum relative error a trinomial model with n timesteps will incur given all other inputs as compared to the standard BSM model. I'm concerned mostly ...
In quantitative finance, we know we have a lot of option price models such as geometric Brownian motion model (Black-Scholes models), stochastic volatility model (Heston), jump diffusion models and so ...
Everyone seems to agree that the option prices predicted by the Black-Merton-Scholes model are inconsistent with what is observed in reality. Still, many people rely on the model by using "the wrong ...