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Looking Forward to Pricing Options from Binomial Trees

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Author Info

  • Dario Villani

    (Department of Physics and Astronomy Rutgers University)

  • Andrei E. Ruckenstein

    (Department of Physics and Astronomy Rutgers University)

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    Abstract

    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. Our 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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    File URL: http://128.118.178.162/eps/fin/papers/0004/0004009.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Finance with number 0004009.

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    Length: 12 pages
    Date of creation: 17 Aug 2000
    Date of revision:
    Handle: RePEc:wpa:wuwpfi:0004009

    Note: Type of Document - tar/gz; prepared on UNIX Sparc TeX; to print on PostScript; pages: 12 ; figures: included
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    Web page: http://128.118.178.162

    Related research

    Keywords: Binomial trees; barrier options;

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    Cited by:
    1. feng dai, 2004. "The Partial Distribution: Definition, Properties and Applications in Economy," Econometrics 0403008, EconWPA.

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