CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS

A European option is a financial contract which gives its holder a right (but not an obligation) to buy or sell an underlying asset from writer at the time of expiry for a pre-determined price. The continuous European options pricing model is given by the Black-Scholes formula, while the discrete mo...

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Main Author: AGUSTINA (NIM 20106005), FITRIANI
Format: Theses
Language:Indonesia
Online Access:https://digilib.itb.ac.id/gdl/view/12127
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Institution: Institut Teknologi Bandung
Language: Indonesia
id id-itb.:12127
spelling id-itb.:121272017-09-27T14:41:45ZCONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS AGUSTINA (NIM 20106005), FITRIANI Indonesia Theses INSTITUT TEKNOLOGI BANDUNG https://digilib.itb.ac.id/gdl/view/12127 A European option is a financial contract which gives its holder a right (but not an obligation) to buy or sell an underlying asset from writer at the time of expiry for a pre-determined price. The continuous European options pricing model is given by the Black-Scholes formula, while the discrete model can be priced using binomial model. We define the error simply as the difference between the binomial approximation and the value computed by the Black-Scholes formula. An interesting property about error is how to understand the convergence of the binomial model to the Black-Scholes model. In this theses, we prove that order of convergence one for Cox-Ross-Rubinstein binomial model (1979). text
institution Institut Teknologi Bandung
building Institut Teknologi Bandung Library
continent Asia
country Indonesia
Indonesia
content_provider Institut Teknologi Bandung
collection Digital ITB
language Indonesia
description A European option is a financial contract which gives its holder a right (but not an obligation) to buy or sell an underlying asset from writer at the time of expiry for a pre-determined price. The continuous European options pricing model is given by the Black-Scholes formula, while the discrete model can be priced using binomial model. We define the error simply as the difference between the binomial approximation and the value computed by the Black-Scholes formula. An interesting property about error is how to understand the convergence of the binomial model to the Black-Scholes model. In this theses, we prove that order of convergence one for Cox-Ross-Rubinstein binomial model (1979).
format Theses
author AGUSTINA (NIM 20106005), FITRIANI
spellingShingle AGUSTINA (NIM 20106005), FITRIANI
CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS
author_facet AGUSTINA (NIM 20106005), FITRIANI
author_sort AGUSTINA (NIM 20106005), FITRIANI
title CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS
title_short CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS
title_full CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS
title_fullStr CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS
title_full_unstemmed CONVERGENCE OF LEISEN-REIMER BINOMIAL MODEL IN PRICING EUROPEAN OPTIONS
title_sort convergence of leisen-reimer binomial model in pricing european options
url https://digilib.itb.ac.id/gdl/view/12127
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