n Investment Analysts Journal - Investment basics : XXXVIII. Options pricing using a binomial lattice

Volume 1999, Issue 48
  • ISSN : 1029-3523
  • E-ISSN: 2077-0227
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Extracted from text ... Number 48 - Part 5 M Page* Investment Basics: XXXVIII. Options pricing using a binomial lattice 1. Introduction The use of binomial trees in the numerical valuation of options was first proposed by Cox, Ross and Rubinstein (1979). Although not as instantaneously recognised as the Black-Scholes (1973) options pricing model, binomial lattices are more easily generalisable and they are often able to handle a variety of conditions for which the former model cannot be applied. The binomial model uses a discrete time framework to trace the evolution of the key variable upon which the claim of interest is contingent. For ..

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