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How to prove that a market is incomplete using the concept of EMMs?

Question Consider a one-step trinomial tree, where there are two traded assets, a bond with risk-free rate, $r$, a stock with initial price, $S_0$, and terminal price $$S_T = \begin{cases} S_0u,& ...
Hmmmmm's user avatar
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How to price a derivative security in a trinomial asset pricing model

I am reading the first two chapters of Shreve's book "Stochastic Calculus for finance 1". The author discusses the question of how to price a derivative security assuming a binomial asset ...
Amr's user avatar
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Theory of the convergence of option prices using trees

My current understanding of the theory behind the convergence of options prices using trees is the following: Suppose $S = (S_{t})_{0\leq t\leq T}$ is the underlying process and $g(S_{t}:0\leq t\leq T)...
cici30725's user avatar
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Trinomial Trees for Hull-White model

I am studying trinomial trees and trying to implement them in Python to compare them to the monte carlo simulation. I searched 3-4 hours in the web; but can't find any implementation on binomial or ...
a.hilary's user avatar
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How to find an arbitrage when the solution is not obvious (2 assets in a market)?

I am struggling to find an arbitrage in the following configuration. I know how to prove that there is an arbitrage (using the fundamental theorem of asset pricing). So I ve proven there is an ...
Marine Galantin's user avatar
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Boyles Model for Trinomial Tree

I know that the risk neutral probabilities in Boyle's Model for the Trinomial Tree by recombining where $m=1, u.d=1$ and $u=e^{\lambda\sigma \Delta t}$ $p_u=\frac{u(V+M^2-M)-(M-1)}{(u^2-1)(u-1)}$ ...
Anon's user avatar
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