Random Dynamics and Finance: Constructing Implied Binomial Trees from a Predetermined Stationary Den
Wael Bahsoun (),
Pawel GÃ³ra (),
Silvia Mayoral and
Manuel Morales ()
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Wael Bahsoun: University of Victoria
Pawel GÃ³ra: Concordia University
Manuel Morales: University of Montreal
No 13/06, Faculty Working Papers from School of Economics and Business Administration, University of Navarra
We introduce a general binomial model for asset prices based on the concept of random maps. The asymptotic stationary distribution for such model is studied using techniques from dynamical systems. In particular, we present a technique to construct a general binomial model with a predetermined stationary distribution. This technique is independent of the chosen distribution making our model potentially useful in financial applications. We brie y explore the suitability of our construction as an implied binomial tree.
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Published, Applied Stochastics models in Business and Industry, 2007, vol. 23(3): pp. 181-212.
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Persistent link: https://EconPapers.repec.org/RePEc:una:unccee:wp1306
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