Option pricing in CRR model with time dependent parameters for two periods of time - part II

Authors

  • Emilia Fraszka-Sobczyk Faculty of Economics and Sociology, University of Łódź, Poland
  • Anna Chojnowska-Michalik Faculty of Mathematics and Informatics, University of Łódź, Poland

Keywords:

Cox-Ross-Rubinstein model (CRR model), Black-Scholes formula, option pricing

Abstract

In the second part of the paper we prove the convergence of option prices in the presented model to the price that is given by some formula corresponding to the Black-Scholes formula.

References

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A. Chojnowska-Michalik and E. Fraszka-Sobczyk, On the uniform convergence of Cox-Ross-Rubinstein formulas, Bull. Soc. Sci. Lettres Łódź Sér. Rech. Déform. 66, no. 1 (2016), 29–38.

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R. J. Elliot and P. E. Kopp, Mathematics of Financial Markets, Springer-Verlag, New York 2005.

E. Fraszka-Sobczyk, On some generalization of the Cox-Ross-Rubinstein model and its asymptotics of Black-Scholes type Bull. Soc. Sci. Lettres Łódź Sér. Rech. Déform. 64, no. 1 (2014), 25–34.

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M. Musiela and M. Rutkowski, Martingale Methods in Financial Modelling, Springer- Verlag, Berlin 2005

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Published

2020-10-01

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Articles