We propose a new lattice based algorithm for option and bond pricing which relies on computationally simple trees ,i.e., trees with the number of nodes that grows at most linearly in the number of time intervals. The discrete approximating process is shown to converge to the target continuous process. The proposed model is efficient and accurate with respect to other existing pricing models.

Computationally simple lattice methods for option and bond pricing

COSTABILE, Massimo;LECCADITO, ARTURO;MASSABO', Ivar
2009

Abstract

We propose a new lattice based algorithm for option and bond pricing which relies on computationally simple trees ,i.e., trees with the number of nodes that grows at most linearly in the number of time intervals. The discrete approximating process is shown to converge to the target continuous process. The proposed model is efficient and accurate with respect to other existing pricing models.
Recombining lattices.; Option pricing.; Discrete-time models.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.11770/123079
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