Multinomial Approximating Models for Options with k State Variables
AbstractContingent claims whose values depend on multiple sources of uncertainty arise in many financial contracts and in the analysis of real projects. Unfortunately closed form solutions for these options are rare and numerical methods can be computationally expensive. This article extends the literature on multinomial approximating models. Specifically, new multinomial models are presented that include as special cases existing models. The more general models are shown to be computationally more efficient.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 37 (1991)
Issue (Month): 12 (December)
contingent claims; option pricing; geometric Wiener processes; multinomial lattice;
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