Abstract
This chapter presents Brownian motion, also known as Wiener process. This is the most fundamental continuous-time model in finance.
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Notes
- 1.
This is in fact a pseudo code of the actual program for the R function CRRBinomialTreeOption in the Rmetrics package due to Diethelm Wuertz.
- 2.
Milstein, G. N. (1978). A method of second order accuracy integration of stochastic differential equations. Theory of Probability & its Applications 19 (3): 557-562.
- 3.
see Hull (2009) for details on this important index.
- 4.
Answer: 37 %. The method EuropeanOptionImpliedVolatility in the R package RQuantLib might be of help.
- 5.
Uhlenbeck, G. E. and Ornstein, L. S. (1930) On the Theory of the Brownian Motion, Phys. Rev., 36, 823–841.
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Arratia, A. (2014). Brownian Motion, Binomial Trees and Monte Carlo Simulation. In: Computational Finance. Atlantis Studies in Computational Finance and Financial Engineering, vol 1. Atlantis Press, Paris. https://doi.org/10.2991/978-94-6239-070-6_5
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DOI: https://doi.org/10.2991/978-94-6239-070-6_5
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