2005•Unpublished venueRequires access

Binomial option pricing model considering stochastic factors

Ronghua Li

Abstract

The mathematical model of binomial option pricing with stochasticity was established by the introduction of stochastic factor into the model of binomial option pricing.And the computation formulas of European option under certain conditions,with same or different interest rate of single stage and multistage,were given.It is proved that the formula of binomial option pricing is a special case of European option formulas.

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Available abstract

Key concepts: Finite difference methods for option pricing, Binomial options pricing model, Trinomial tree, Valuation of options, Binomial (polynomial), Monte Carlo methods for option pricing, Binomial distribution, Econometrics