Skip to Main content Skip to Navigation
Reports

A Moments and Strike Matching Binomial Algorithm for Pricing American Put Options

Benjamin Jourdain 1 Antonino Zanette 1
1 MATHFI - Financial mathematics
Inria Paris-Rocquencourt, ENPC - École des Ponts ParisTech, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Abstract : This paper is dedicated to a new binomial lattice method (MSM) consistent with the Black-Scholes model in the limit of an infinite step number and such that the Strike $K$ is equal to one of the final nodes of the tree. The method is very easy to implement, since the parameters are explicitly given. Asymptotic expansions are obtained for the MSM European Put price and delta, which motivates the use of Richardson extrapolation. A numerical comparison with the best lattice based numerical methods known in literature, shows the efficiency of the proposed algorithm for pricing and hedging American Put options.
Document type :
Reports
Complete list of metadata

https://hal.inria.fr/inria-00070437
Contributor : Rapport de Recherche Inria <>
Submitted on : Friday, May 19, 2006 - 8:29:04 PM
Last modification on : Friday, November 29, 2019 - 12:28:02 PM
Long-term archiving on: : Sunday, April 4, 2010 - 9:13:19 PM

Identifiers

  • HAL Id : inria-00070437, version 1

Collections

Citation

Benjamin Jourdain, Antonino Zanette. A Moments and Strike Matching Binomial Algorithm for Pricing American Put Options. [Research Report] RR-5569, INRIA. 2005, pp.15. ⟨inria-00070437⟩

Share

Metrics

Record views

316

Files downloads

541