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Article

Improving Convergence of Binomial Schemes and the Edgeworth Expansion

by 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
Risks 2016, 4(2), 15; https://doi.org/10.3390/risks4020015
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)
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
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MDPI and ACS Style

Bock, A.; Korn, R. Improving Convergence of Binomial Schemes and the Edgeworth Expansion. Risks 2016, 4, 15. https://doi.org/10.3390/risks4020015

AMA Style

Bock A, Korn R. Improving Convergence of Binomial Schemes and the Edgeworth Expansion. Risks. 2016; 4(2):15. https://doi.org/10.3390/risks4020015

Chicago/Turabian Style

Bock, Alona, and Ralf Korn. 2016. "Improving Convergence of Binomial Schemes and the Edgeworth Expansion" Risks 4, no. 2: 15. https://doi.org/10.3390/risks4020015

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