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Questions tagged [binomial]

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American put option in binomial model - arbitrage opportunity?

I'm sorry this must be an elementary question. I spent a good deal of time searching through webs including this site for the problem but I got none. Here's the problem: Say we have a binomial tree ...
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134 views

R/fOptions Binomial Options Pricing warning message

Trying to compute theoretical prices for a set of options using the R package fOptions: ...
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Question about Paul Kupiec's “concentrated Bond loss rate distribution”

I wonder if anyone here has read the following paper by Paul Kupiec in which he approximates a loss rate distribution for a portfolio composed of (possibly) concentrated bond positions. https://www....
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Two-period binomial model for American option

Consider a two-period binomial model for a risk asset with each period equal to a year and take $S_0 = 1$, $u = 1.5$, and $l = 0.6$. The interest rate for both periods is $R = .1$. a.) Price an ...
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Jabbour-Kramin-Young ABMC Binomial Parameterization

The JKY ABMC Model (taken from Jabbour, et al. 2001) parameterizes the binomial model (in a risk-neutral world) such that, $u = e^{r\Delta t} + e^{r\Delta t}\sqrt{e^{\sigma^2\Delta t} - 1}$ $d = e^{...
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How to price an option with a “step up” feature using binomial tree?

I have a call option with expiry in two years. In my case the option is bermudan style with first 9 months w/o ability to exercise (i.e. European) and after exercise at any time (i.e. American), but I ...
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Binomial tree for elementary security

I'm coursing a financial engineering course and must build a binomial tree for a security that is valued 1 in state and time 0. I dont get the formula given by the instructors, and trying to apply the ...
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Binomial correlation measure in the trivariate case

I have a question about the binomial correlation measure at page 530 in Hull(2009), Options futures and other derivatives (7th Edition) which is defined for the bivariate case as: $\beta_{AB}(T)=\...