On the analytical/numerical pricing of American put options against binomial tree prices

We compare the bias in binomial trees against that in certain analytical/numerical valuation techniques with which they disagree. We consider the CRR tree, the COS method and the Leisen--Reimer as well as the Prekopa--Szantai exponentially smoothed method. We conclude that the binomial trees are unbiased and that the exponentially smoothed method is biased.

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Year of publication:	2012
Authors:	Joshi, Mark ; Staunton, Mike
Published in:	Quantitative Finance. - Taylor & Francis Journals, ISSN 1469-7688. - Vol. 12.2012, 1, p. 17-20
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010606761