Computation of Greeks using binomial trees in a jump-diffusion model

Shintaro Suda and Yoshifumi Muroi

Journal of Economic Dynamics and Control, 2015, vol. 51, issue C, 93-110

Abstract: We propose a new algorithm for computing the Greeks in jump-diffusion settings using binomial trees. We further demonstrate that the Greeks for European options converge to the Malliavin Greeks in the continuous time model. Our proposed algorithm is efficient, because the price and the Greeks (Delta, Gamma, Vega, and Rho) can be computed simultaneously. Computation of the Greeks for American options is also discussed.

Keywords: Options; Greeks; Jump-diffusion model; Binomial tree (search for similar items in EconPapers)
JEL-codes: C63 G13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:51:y:2015:i:c:p:93-110

DOI: 10.1016/j.jedc.2014.09.032

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