Market option prices in last 20 years confirmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility known as "volatility smile". They provide a discrete...

In this paper, European put option pricing with stochastic volatility forecasted by well known GARCH model is discussed in context of Indian financial market. The data of Reliance Ltd. stock price from 3/01/2000 to 30/03/2009 is used and resulting partial differential equation is solved by...

Under the local volatility model, the convergence of Monte-Carlo with Milstein discretization and Euler discretization are compared for the pricing of Vanilla, Digital, discrete Barrier options as well as a more exotic variety of option, the Accumulator. A finite difference approach is also...