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Binomial options pricing has no closed-form solution

Author

Listed:
  • Georgiadis, Evangelos

    (M.I.T., USA)

Abstract

We set a lower bound on the complexity of options pricing formulae in the lattice metric by proving that no general explicit or closed form (hypergeometric) expression for pricing vanilla European call and put options exists when employing the binomial lattice approach. Our proof follows from Gosper’s algorithm

Suggested Citation

  • Georgiadis, Evangelos, 2011. "Binomial options pricing has no closed-form solution," Algorithmic Finance, IOS Press, vol. 1(1), pages 13-16.
    • Handle: RePEc:ris:iosalg:0002
    as

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    Citations

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    Cited by:

    1. Hong Mao & Zhongkai Wen, 2019. "Pricing options of security portfolio in cyclical economic environment," Journal of Asset Management, Palgrave Macmillan, vol. 20(5), pages 384-394, September.
    2. Jarno Talponen, 2013. "Matching distributions: Asset pricing with density shape correction," Papers 1312.4227, arXiv.org, revised Mar 2018.
    3. Jean-Christophe Breton & Youssef El-Khatib & Jun Fan & Nicolas Privault, 2021. "A q-binomial extension of the CRR asset pricing model," Papers 2104.10163, arXiv.org, revised Feb 2023.

    More about this item

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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