Random binomial tree models and put options
In this paper we introduce and study the simplest random binomial tree model. Usual binomial tree model is prescribed by pair of numbers (u, d), where u denotes the increase rate of the stock over the fixed period of time and d denotes the decrease rate, with 0< d < 1< u. We call the pair (...
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| Main Authors: | , |
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| Format: | Conference or Workshop Item |
| Language: | English English |
| Published: |
IIUM
2012
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/26982/1/2010C.pdf http://irep.iium.edu.my/26982/4/Programme_Book_latest_2.pdf http://irep.iium.edu.my/26982/ http://www.iium.edu.my/icmae/12/ |
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| Institution: | Universiti Islam Antarabangsa Malaysia |
| Language: | English English |
| Summary: | In this paper we introduce and study the simplest random binomial tree model. Usual binomial tree model is prescribed by pair of numbers (u, d), where u denotes the increase rate of the stock over the fixed period of time and d denotes the decrease rate, with 0< d < 1< u. We call the pair (u, d) an environment of the binomial tree model. A pair (Un, Dn), where {Un} and {Dn} are the sequences of
independent, identically distributed random variables with 0< Dn < 1< Un for all n, is called a random environment and binomial tree model with random environment is called random binomial tree model. In this paper we define and study European put option for such models. |
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