Random Dynamics and Finance: Constructing Implied Binomial Trees from a Predetermined Stationary Den
AbstractWe introduce a general binomial model for asset prices based on the concept of random maps. The asymptotic stationary distribution for such model is studied using techniques from dynamical systems. In particular, we present a technique to construct a general binomial model with a predetermined stationary distribution. This technique is independent of the chosen distribution making our model potentially useful in financial applications. We brie y explore the suitability of our construction as an implied binomial tree.
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Bibliographic InfoPaper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 13/06.
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Publication status: Published, Applied Stochastics models in Business and Industry, 2007, vol. 23(3): pp. 181-212.
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
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