✦ LIBER ✦
Trinomial or binomial: Accelerating American put option price on trees
✍ Scribed by Jiun Hong Chan; Mark Joshi; Robert Tang; Chao Yang
- Publisher
- John Wiley and Sons
- Year
- 2009
- Tongue
- English
- Weight
- 106 KB
- Volume
- 29
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
We investigate the pricing performance of eight trinomial trees and one binomial tree, which was found to be most effective in an earlier study, under 20 different implementation methodologies for pricing American put options. We conclude that the binomial tree, the Tian third‐order moment‐matching tree with truncation, Richardson extrapolation, and smoothing, performs better than the trinomial trees. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:826–839, 2009