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The Binomial Black–Scholes model and the Greeks

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  • San‐Lin Chung
  • Mark Shackleton

Abstract

This article returns to the choice of method for calculating option hedge ratios discussed by Pelsser and Vorst (1994). Where they demonstrated that numerical differentiation of a binomial model compared poorly to their design of an extended tree, this study shows that the Binomial Black–Scholes method advocated by Broadie and Detemple (1996) does not suffer from the same problem; therefore, it is very effective in the calculation of the Greeks. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22:143–153, 2002

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  • San‐Lin Chung & Mark Shackleton, 2002. "The Binomial Black–Scholes model and the Greeks," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 22(2), pages 143-153, February.
    • Handle: RePEc:wly:jfutmk:v:22:y:2002:i:2:p:143-153
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    Cited by:

    1. Douglas Emery & Weiyu Guo & Tie Su, 2008. "A closer look at Black–Scholes option thetas," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 32(1), pages 59-74, January.
    2. Muroi, Yoshifumi & Suda, Shintaro, 2017. "Computation of Greeks in jump-diffusion models using discrete Malliavin calculus," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 140(C), pages 69-93.

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