In this paper, we focus on two-factor lattices for general diffusion processes with state-dependent volatilities. Although it is common knowledge that branching probabilities must be between zero and one in a lattice, few methods can guarantee lattice feasibility, referring to the property that...

A study of the use and improvement of Hull and White's (1988) control variate technique in pricing options is provided. It contributes to the literature in two ways. First it is shown that it is not optimal to use the entire error of a control variate against its known price (usually a...

The American early exercise feature of the Real Option to invest in a new project is important in capital budgeting and project valuation. Closed form solutions for American, and therefore Real, Options are known for two special cases; an infinite horizon generates the Merton (Bell Journal of...