Questions tagged [trinomial-tree]
The trinomial-tree tag has no usage guidance.
5
questions
1
vote
0
answers
67
views
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)...
- 11
0
votes
0
answers
54
views
Trinomial model
What is the aim of having the price of a self financing portfolio in the trinomial model if we know that the option we are considering is not duplicable ? Do we have to assume that the payoff of the ...
- 145
1
vote
1
answer
1k
views
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 ...
- 11
3
votes
1
answer
221
views
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 ...
- 230
0
votes
1
answer
252
views
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 $u=e^{\lambda\sigma \Delta t}$
$p_u=\frac{u(V+M^2-M)-(M-1)}{(u^2-1)(u-1)}$
...
- 281