On the analytical/numerical pricing of American put options against binomial tree prices
We compare the bias in binomial trees against that in certain analytical/numerical valuation techniques with which they disagree. We consider the CRR tree, the COS method and the Leisen--Reimer as well as the Prekopa--Szantai exponentially smoothed method. We conclude that the binomial trees are unbiased and that the exponentially smoothed method is biased.
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Volume (Year): 12 (2012)
Issue (Month): 1 (December)
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