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2011•Unpublished venueRequires access

The Binomial Option Pricing Models with Different Parameters

Lijuan Lu, Yunjiao Hu, Rongxi Zhou

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Abstract

Probability theory is used to construct a new type of binomial parameter model, which can avoid negative probability. A detailed proof is given for the generalized binomial model where an extended parameter is added to. The European options and Asian options are priced respectively by numerical examples. The results show that all the binomial models with different parameters have excellent convergence. In addition, the convergence of the generalized binomial model is more stable.

About this research paper

What this paper is about

Probability theory is used to construct a new type of binomial parameter model, which can avoid negative probability. A detailed proof is given for the generalized binomial model where an extended parameter is added to. The European options and Asian options are priced respectively by numerical examples. The results show that all the binomial models with different parameters have excellent convergence. In addition, the convergence of the generalized binomial model is more stable.

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OpenAlex reports 1 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

Probability theory is used to construct a new type of binomial parameter model, which can avoid negative probability. A detailed proof is given for the generalized binomial model where an extended parameter is added to. The European options and Asian options are priced respectively by numerical examples. The results show that all the binomial models with different parameters have excellent convergence. In addition, the convergence of the generalized binomial model is more stable.

Key concepts: Binomial (polynomial), Binomial options pricing model, Binomial distribution, Convergence (economics), Applied mathematics, Mathematics, Binomial approximation, Negative binomial distribution

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