Computation of Greeks using binomial trees in a jump-diffusion model

We propose a new algorithm for computing the Greeks in jump-diffusion settings using binomial trees. We further demonstrate that the Greeks for European options converge to the Malliavin Greeks in the continuous time model. Our proposed algorithm is efficient, because the price and the Greeks (Delta, Gamma, Vega, and Rho) can be computed simultaneously. Computation of the Greeks for American options is also discussed.

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Year of publication:	2015
Authors:	Suda, Shintaro ; Muroi, Yoshifumi
Published in:	Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 51.2015, C, p. 93-110
Publisher:	Elsevier
Subject:	Options \| Greeks \| Jump-diffusion model \| Binomial tree

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Type of publication:	Article
Classification:	C63 - Computational Techniques ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011190671