Implied trinomial trees (ITTs) present an analogous extension of trinomial trees proposed by Derman, Kani, and Chriss (1996). Like their binomial counterparts, they can fit the market volatility smile and actually converge to the same continuous limit as binomial trees. In addition, they allow...

Options are financial derivatives that, conditional on the price of an underlyingasset, constitute a right to transfer the ownership of this underlying. Morespecifically, a European call and put options give their owner the right to buyand sell, respectively, at a fixed strike price at a given...