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These options can be priced by adding an early exercise premium value to the intrinsic value: http://www.statistics.nus.edu.sg/~stalimtw/PDF/lb-float.pdf


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The condition $$ud=1\text{, or equivalently }u=1/d$$ is necessary to ensure convergence of the Binomial tree's mean $\mu$ and standard deviation $\sigma$ to nonfinite values when $n$ (number of steps) goes to infinity. Cox-Rubinstein-Ross showed in their famous paper, that to achieve this, we must have: $$u=e^{\sigma\sqrt{t/n}}\text{, ...



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