A moments and strike matching binomial algorithm for pricing American Put options

Benjamin Jourdain; Antonino Zanette

doi:10.1007/s10203-007-0077-5

A moments and strike matching binomial algorithm for pricing American Put options

Benjamin Jourdain
, Antonino Zanette

and Physics University of Udine

Résultats de recherche: Contribution à un journal › Article › Revue par des pairs

3 Citations (Scopus)

Résumé

This paper is dedicated to a new binomial lattice method called Moments and Strike Matching (MSM) consistent with the Black-Scholes model in the limit of an infinite step number and such that the Strike K is equal to one of the final nodes of the tree. The method is very easy to implement, since the parameters are explicitly given. Asymptotic expansions are obtained for the MSM European Put price and delta, which motivates the use of Richardson extrapolation. A numerical comparison with the best lattice based numerical methods known in literature, shows the efficiency of the proposed algorithm for pricing and hedging American Put options.

langue originale	Anglais
Pages (de - à)	33-49
Nombre de pages	17
journal	Decisions in Economics and Finance
Volume	31
Numéro de publication	1
Les DOIs	https://doi.org/10.1007/s10203-007-0077-5
état	Publié - 1 janv. 2008

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10.1007/s10203-007-0077-5

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A moments and strike matching binomial algorithm for pricing American Put options

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