Abstract
A large range of options exist for which the boundary conditions of the Black-Scholes differential equation are too complex to solve analytically; an example being the American option. One therefore has to rely on numerical price computation. The best known methods for this approximate the stock price process by a discrete time stochastic process, or, as in the approach followed by Cox, Ross, Rubinstein, model the stock price process as a discrete time process from the start. The binomial model is a convenient tool for pricing European option.
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© 2010 Springer-Verlag Berlin Heidelberg
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Borak, S., Härdle, W.K., Cabrera, B.L. (2010). Binomial Model for European Options. In: Statistics of Financial Markets. Universitext. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-11134-1_7
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DOI: https://doi.org/10.1007/978-3-642-11134-1_7
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Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-11133-4
Online ISBN: 978-3-642-11134-1
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