2004•Unpublished venueRequires access

Trinomial Option Pricing Model of Call Option for Finite Periods

Jun Wang

Abstract

A trinomial option pricing model for finite periods is studied in this paper, between two consecutive periods the relative price changes have three possible states, so it extends the theory of Cox_Ross_Rubinstein binomial option price model. Through the theory of probability, we show the formula of the trinomial option pricing model for finite periods in a stock market.

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Available abstract

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