Improving convergence of binomial schemes and the Edgeworth expansion

Binomial trees are very popular in both theory and applications of option pricing. As they often suffer from an irregular convergence behavior, improving this is an important task. We build upon a new version of the Edgeworth expansion for lattice models to construct new and quickly converging binomial schemes with a particular application to barrier options.

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Year of publication:	2016
Authors:	Bock, Alona ; Korn, Ralf
Published in:	Risks. - Basel : MDPI, ISSN 2227-9091. - Vol. 4.2016, 2, p. 1-22
Publisher:	Basel : MDPI
Subject:	binomial model \| Black-Scholes model \| option pricing \| accelerated convergence \| weak convergence

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.3390/risks4020015 [DOI] 863631401 [GVK] hdl:10419/167885 [Handle]
Source:	EconStor

Persistent link: https://www.econbiz.de/10011709556