An algorithm is proposed for the discrete approximation of continuous market price processes that uses trees instead of lattices. It is shown that it is convergent when used for pricing both European and American options and that it is more efficient, for some models, than the usual recombining...

A valuation problem of the European style contingent claim in the market with daily price movement limit is studied. Unlike the one leading to the well known Black-Scholes formula, this problem depicts considerable conceptual difficulty and anomaly created by the presence of various arbitrage...

This paper concerns questions related to the regulation of liquidity risk, and proposes a definition of an acceptable portfolio. Because the concern is with risk management, the paper considers processes under the physical (rather than the martingale) measure. Basically, a portfolio is...