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Looking Forward to Pricing Options from Binomial Trees

Listed author(s):
  • Dario Villani

    (Department of Physics and Astronomy Rutgers University)

  • Andrei E. Ruckenstein

    (Department of Physics and Astronomy Rutgers University)

Registered author(s):

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

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    Length: 12 pages
    Date of creation: 17 Aug 2000
    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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