Sun Sheng-li
Abstract
Through analysis and comparison,it has been found that both of the models can meet the same stochastic differential equations and the option is of the same price under the model,with Black-Scholes' option pricing model given first,and then its pricing formula deduced by martingale approach,and finally option pricing model of O-U process introduced.
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Through analysis and comparison,it has been found that both of the models can meet the same stochastic differential equations and the option is of the same price under the model,with Black-Scholes' option pricing model given first,and then its pricing formula deduced by martingale approach,and finally option pricing model of O-U process introduced.
Key concepts: Finite difference methods for option pricing, Martingale pricing, Trinomial tree, Valuation of options, Black–Scholes model, Monte Carlo methods for option pricing, Martingale (probability theory), Binomial options pricing model