This article develops a flexible binomial model with a "tilt" parameter that alters the shape and span of the binomial tree. A positive tilt parameter shifts the tree upward while a negative tilt parameter does exactly the opposite. This simple extension of the standard binomial model is shown to co
SUBORDINATED BINOMIAL OPTION PRICING
β Scribed by Carolyn W. Chang; Jack S. K. Chang; Yisong Sam Tian
- Book ID
- 111215524
- Publisher
- John Wiley and Sons
- Year
- 2006
- Tongue
- English
- Weight
- 237 KB
- Volume
- 29
- Category
- Article
- ISSN
- 0270-2592
No coin nor oath required. For personal study only.
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## Abstract This article revisits the topic of twoβstate option pricing. It examines the models developed by Cox, Ross, and Rubinstein (1979), Rendleman and Bartter (1979), and Trigeorgis (1991) and presents two alternative binomial models based on the continuousβtime and discreteβtime geometric Br
This article generalizes the seminal Cox-Ross- binomial option pricing model to all members of the class of transformed-binomial pricing processes. The investigation addresses issues related with asset pricing modeling, hedging strategies, and option pricing. Formulas are derived for (a) replicatin