The multinomial option pricing model and its Brownian and poisson limits

Frank Milne; Dilip Madan; Hersh Shefrin

The Cox, Ross, and Rubinstein binomial model is generalized to the multinomial case. Limits are investigated and shown to yield the Black-Scholes formula in the case of continuous sample paths for a wide variety of complete market structures. In the discontinuous case a Merton-type formula is shown to result, provided jump probabilities are replaced by their corresponding Arrow-Debreu prices.

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Year of publication:	1990
Other Persons:	Milne, Frank (contributor) ; Madan, Dilip B. (contributor) ; Shefrin, Hersh (contributor)
Publisher:	Kingston : Queen's Economics Dep.
Subject:	Derivat \| Derivative \| CAPM \| Theorie \| Theory

Extent:	Online-Ressource (S. 252 - 265)
Series:	Queen's Economics Department working paper. - Kingston, Ontario : [Verlag nicht ermittelbar], ZDB-ID 2272591-X. - Vol. 1162
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Aus: The review of financial studies ; 2,2 Systemvoraussetzungen: Acrobat Reader
Other identifiers:	hdl:10419/67854 [Handle]
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10003780966