Using Computer Algebra Packages to Complement the Spreadsheet Construction of Binomial Option Trees: The Example of Mathcad

Alejandro Hazera (), Allan Graham () and Salvador Marin Hernandez ()
Additional contact information
Alejandro Hazera: University of Rhode Island
Allan Graham: University of Rhode Island
Salvador Marin Hernandez: Universidad de Murcia

Computers in Higher Education Economics Review, 2007, vol. 19, issue 1, pages 21-23

Abstract: In this paper we show how the mathematical programming package Mathcad can be used to complement the construction of a binomial option tree in Excel. A binomial option tree is first constructed in Excel using standard spreadsheet 'cut and paste' operations. The same binomial tree is then constructed in Mathcad. We conclude that spreadsheet construction of the tree provides students with a sound concept of the underlying mechanics of the option tree. Additionally, the Mathcad construction reinforces the mathematical notation found in many option pricing texts (e.g. summation signs and indices) and allows for the construction of a more flexible lattice that may be easily altered (e.g. the number of steps). In the process students are provided with an understanding of how to construct option trees in the increasingly important world of computer algebra packages.

Date: 2007
View list of references

Downloads: (external link)
http://www.economicsnetwork.ac.uk/cheer/ch19/hazera.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:che:chepap:v:19:y:2007:i:1:p:21-23

Ordering information: This journal article can be ordered from

Access Statistics for this article

Computers in Higher Education Economics Review is edited by W. David McCausland

More articles in Computers in Higher Education Economics Review from Economics Network, University of Bristol
Address: University of Bristol, BS8 1HH, United Kingdom
Contact information at EDIRC.
Series data maintained by Martin Poulter ().