Chang, Carolyn W.; Chang, Jack S. K. - In: Review of Pacific Basin Financial Markets and Policies … 08 (2005) 03, pp. 501-523
We generalize the standard lattice approach of Cox, Ross, and Rubinstein (1976) from a fixed sum to a random sum in a subordinated process framework to accommodate pricing of derivatives with random-sum characteristics. The asset price change now is determined by two independent Bernoulli trials...