Next Article in Journal
Spouses’ Dependence across Generations and Pricing Impact on Reversionary Annuities
Next Article in Special Issue
Survey on Log-Normally Distributed Market-Technical Trend Data
Previous Article in Journal
Estimating Quantile Families of Loss Distributions for Non-Life Insurance Modelling via L-Moments
Previous Article in Special Issue
Inflation Protected Investment Strategies
Article Menu

Export Article

Open AccessFeature PaperArticle
Risks 2016, 4(2), 15; doi:10.3390/risks4020015

Improving Convergence of Binomial Schemes and the Edgeworth Expansion

1
and
1,2,*
1
Department of Mathematics, University of Kaiserslautern, 67663 Kaiserslautern, Germany
2
Financial Mathematics, Fraunhofer ITWM, Fraunhofer Platz 1, 67663 Kaiserslautern, Germany
*
Author to whom correspondence should be addressed.
Academic Editor: Alexander Szimayer
Received: 12 April 2016 / Revised: 10 May 2016 / Accepted: 13 May 2016 / Published: 23 May 2016
(This article belongs to the Special Issue Applying Stochastic Models in Practice: Empirics and Numerics)
View Full-Text   |   Download PDF [523 KB, uploaded 23 May 2016]   |  

Abstract

Binomial trees are very popular in both theory and applications of option pricing. As they often suffer from an irregular convergence behavior, improving this is an important task. We build upon a new version of the Edgeworth expansion for lattice models to construct new and quickly converging binomial schemes with a particular application to barrier options. View Full-Text
Keywords: binomial model; Black–Scholes model; option pricing; accelerated convergence; weak convergence binomial model; Black–Scholes model; option pricing; accelerated convergence; weak convergence
Figures

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

Scifeed alert for new publications

Never miss any articles matching your research from any publisher
  • Get alerts for new papers matching your research
  • Find out the new papers from selected authors
  • Updated daily for 49'000+ journals and 6000+ publishers
  • Define your Scifeed now

SciFeed Share & Cite This Article

MDPI and ACS Style

Bock, A.; Korn, R. Improving Convergence of Binomial Schemes and the Edgeworth Expansion. Risks 2016, 4, 15.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Risks EISSN 2227-9091 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top