The Binomial, Multinomial Distributions, and 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 12 in Financial Econometrics, Mathematics and Statistics, 2019, pp 357-378 from Springer

Abstract: Abstract In this chapter, we show how to use binomial and mutinomial distributions to derive option pricing Option pricing models. In addition, we show how the Black and Scholes option pricing model Option pricing model is a limited case of binomial and multinomial option pricing model. Finally, a lattice framework Lattice framework of option pricing model Option pricing model is discussed in some detail.

Keywords: Binomial distribution; Binomial option pricing model; Black and Scholes model; Lattice framework; Multinomial distribution; Multinomial option pricing model; 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_12

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DOI: 10.1007/978-1-4939-9429-8_12

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