Tie Zhang
Abstract
The defects are analyzed for the usual binomial tree model of option pricing. A new type of binomial tree parameter model is constructed by means of stochastic error correcting method. The new model can avoid negative probability and possesses very high accuracy, therefore it can be are applied to various option pricing.
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The defects are analyzed for the usual binomial tree model of option pricing. A new type of binomial tree parameter model is constructed by means of stochastic error correcting method. The new model can avoid negative probability and possesses very high accuracy, therefore it can be are applied to various option pricing.
Key concepts: Binomial options pricing model, Trinomial tree, Binomial (polynomial), Type (biology), Tree (set theory), Mathematics, Binomial distribution, Continuity correction