We consider the problem of evaluating options on a dividend-paying asset by means of a trinomial latticebased model.We propose a suitable construction of the lattice that guarantees the reconnecting property and so keeps the computational cost of the proposed algorithm to a reasonable level. The extensive numerical results obtained show that the model can efficiently compute accurate option prices.
A Shifted Tree Model for the Efficient Evaluation of Options with Fixed Dividends
COSTABILE, Massimo;Massabo' I;Russo E.
2016-01-01
Abstract
We consider the problem of evaluating options on a dividend-paying asset by means of a trinomial latticebased model.We propose a suitable construction of the lattice that guarantees the reconnecting property and so keeps the computational cost of the proposed algorithm to a reasonable level. The extensive numerical results obtained show that the model can efficiently compute accurate option prices.File in questo prodotto:
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