Two Alternative Binomial Option Pricing Model Approaches to Derive Black–Scholes Option Pricing Model

Cheng-Few Lee (), Hong-Yi Chen () and John Lee ()
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Cheng-Few Lee: Rutgers University, Department of Finance and Economics, Rutgers Business School
Hong-Yi Chen: National Chengchi University, Department of Finance
John Lee: Center for PBBEF Research

Chapter Chapter 13 in Financial Econometrics, Mathematics and Statistics, 2019, pp 379-391 from Springer

Abstract: Abstract Based upon the models derived in the previous chapters, based on the binomial model, we present two alternative approaches to derive the Black and Scholes model. These two approaches are developed by Rendleman and Barter (Journal of Finance 24:1093–1110, 1979) and Cox et al. (Journal of Financial Economics 7:229–263, 1979). The relative advantages between these two methods are discussed in some detail.

Keywords: Binomial option pricing model; Black–Scholes formula; Two-state option pricing model (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4939-9429-8_13

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DOI: 10.1007/978-1-4939-9429-8_13

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