Looking Forward to Pricing Options from Binomial Trees

Details Looking Forward to Pricing Options from Binomial Trees Looking Forward to Pricing Options from Binomial Trees

2000-08-17

arxiv.org/abs/physics/0008111v2

Physics

General Physics

12 pages, 1 figure

Scientific paper

We reconsider the valuation of barrier options by means of binomial trees
from a "forward looking" prospective rather than the more conventional
"backward induction" one used by standard approaches. This reformulation allows
us to write closed-form expressions for the value of European and American put
barrier-options on a non-dividend-paying stock.

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