Looking Forward to Pricing Options from Binomial Trees

Dario Villani and Andrei E. Ruckenstein
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Dario Villani: Department of Physics and Astronomy Rutgers University
Andrei E. Ruckenstein: Department of Physics and Astronomy Rutgers University

Finance from University Library of Munich, Germany

Abstract: We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. Our reformulation allows us to write closed-form expressions for the value of European and American put barrier-options on a non-dividend-paying stock.

Keywords: Binomial trees; barrier options (search for similar items in EconPapers)
JEL-codes: C10 D9 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2000-08-17
New Economics Papers: this item is included in nep-fin
Note: Type of Document - tar/gz; prepared on UNIX Sparc TeX; to print on PostScript; pages: 12 ; figures: included
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0004009

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