Generalized Binomial Trees
AbstractWe consider the problem of consistently pricing new options given the prices of related options on the same stock. The Black-Scholes formula and standard binomial trees can only accommodate one related European option which then effectively specifies the volatility parameter. Implied binomial trees can accommodate only related European options with the same time-to-expiration. The generalized binomial trees introduced here can accommodate any kind of related options (European, American, or exotic) with different times-to-expiration.
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Bibliographic InfoPaper provided by University of California at Berkeley in its series Research Program in Finance Working Papers with number RPF-264.
Date of creation: 01 Sep 1996
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- G19 - Financial Economics - - General Financial Markets - - - Other
- G0 - Financial Economics - - General
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- NEP-ALL-2000-01-17 (All new papers)
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