IDEAS home Printed from https://ideas.repec.org/a/che/chepap/v19y2007i1p21-23.html
   My bibliography  Save this article

Using Computer Algebra Packages to Complement the Spreadsheet Construction of Binomial Option Trees: The Example of Mathcad

Author

Listed:
  • Alejandro Hazera

    (University of Rhode Island)

  • Allan Graham

    (University of Rhode Island)

  • Salvador Marin Hernandez

    (Universidad de Murcia)

Abstract

In this paper we show how the mathematical programming package Mathcad can be used to complement the construction of a binomial option tree in Excel. A binomial option tree is first constructed in Excel using standard spreadsheet 'cut and paste' operations. The same binomial tree is then constructed in Mathcad. We conclude that spreadsheet construction of the tree provides students with a sound concept of the underlying mechanics of the option tree. Additionally, the Mathcad construction reinforces the mathematical notation found in many option pricing texts (e.g. summation signs and indices) and allows for the construction of a more flexible lattice that may be easily altered (e.g. the number of steps). In the process students are provided with an understanding of how to construct option trees in the increasingly important world of computer algebra packages.

Suggested Citation

  • Alejandro Hazera & Allan Graham & Salvador Marin Hernandez, 2007. "Using Computer Algebra Packages to Complement the Spreadsheet Construction of Binomial Option Trees: The Example of Mathcad," Computers in Higher Education Economics Review, Economics Network, University of Bristol, vol. 19(1), pages 21-23.
    • Handle: RePEc:che:chepap:v:19:y:2007:i:1:p:21-23
    as

    Download full text from publisher

    File URL: https://www.economicsnetwork.ac.uk/cheer/ch19/hazera.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:che:chepap:v:19:y:2007:i:1:p:21-23. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Poulter (email available below). General contact details of provider: https://www.economicsnetwork.ac.uk/cheer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.