The Rate of Convergence of Binomial Lattice Models for Pricing Vanilla Options

Variations of the binomial tree model are reviewed and extensions to the two most efficient trees studied in a recent literature are proposed. Tian's modified tree is extended to a more general class of tree, and the third order tree is extended to the seventh order tree. Analysis of the error of American put pricing in the binomial tree model is presented and new trees that have superior performance in pricing in-the-money American puts are developed. To further improve numerical results, a scheme that incorporates different trees is suggested

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Year of publication:	2014
Authors:	Joshi, Mark S.
Other Persons:	Kwok, Chun Fung (contributor)
Publisher:	[2014]: [S.l.] : SSRN
Subject:	Optionspreistheorie \| Option pricing theory

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