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Pricing the American put option: A detailed convergence analysis for binomial models

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  • Leisen, Dietmar P. J.

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  • Leisen, Dietmar P. J., 1998. "Pricing the American put option: A detailed convergence analysis for binomial models," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1419-1444, August.
    • Handle: RePEc:eee:dyncon:v:22:y:1998:i:8-9:p:1419-1444
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    References listed on IDEAS

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    1. Patrick Jaillet & Damien Lamberton & Bernard Lapeyre, 1990. "Variational inequalities and the pricing of American options," Post-Print hal-01667008, HAL.
    2. Hull, John & White, Alan, 1988. "The Use of the Control Variate Technique in Option Pricing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(3), pages 237-251, September.
    3. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
    4. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
    5. Dietmar Leisen & Matthias Reimer, 1996. "Binomial models for option valuation - examining and improving convergence," Applied Mathematical Finance, Taylor & Francis Journals, vol. 3(4), pages 319-346.
    6. Barone-Adesi, Giovanni & Whaley, Robert E, 1987. "Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-320, June.
    7. Brennan, Michael J & Schwartz, Eduardo S, 1977. "The Valuation of American Put Options," Journal of Finance, American Finance Association, vol. 32(2), pages 449-462, May.
    8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    9. Peter Carr & Robert Jarrow & Ravi Myneni, 2008. "Alternative Characterizations Of American Put Options," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 5, pages 85-103, World Scientific Publishing Co. Pte. Ltd..
    10. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
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    Cited by:

    1. Ralf Korn & Stefanie Müller, 2013. "The optimal-drift model: an accelerated binomial scheme," Finance and Stochastics, Springer, vol. 17(1), pages 135-160, January.
    2. Andrea Gamba & Lenos Trigeorgis, 2007. "An Improved Binomial Lattice Method for Multi-Dimensional Options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 14(5), pages 453-475.
    3. Mark Joshi & Mike Staunton, 2012. "On the analytical/numerical pricing of American put options against binomial tree prices," Quantitative Finance, Taylor & Francis Journals, vol. 12(1), pages 17-20, December.
    4. Mark Joshi, 2009. "Achieving smooth asymptotics for the prices of European options in binomial trees," Quantitative Finance, Taylor & Francis Journals, vol. 9(2), pages 171-176.
    5. Dietmar P.J. Leisen, 1997. "The Random-Time Binomial Model," Finance 9711005, University Library of Munich, Germany, revised 29 Nov 1998.
    6. San-Lin Chung & Pai-Ta Shih, 2007. "Generalized Cox-Ross-Rubinstein Binomial Models," Management Science, INFORMS, vol. 53(3), pages 508-520, March.
    7. Ting Chen & Mark Joshi, 2012. "Truncation and acceleration of the Tian tree for the pricing of American put options," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1695-1708, November.
    8. Leisen, Dietmar P. J., 1999. "The random-time binomial model," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1355-1386, September.
    9. M. H. Vellekoop & J. W. Nieuwenhuis, 2006. "Efficient Pricing of Derivatives on Assets with Discrete Dividends," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(3), pages 265-284.
    10. Nagae, Takeshi & Akamatsu, Takashi, 2008. "A generalized complementarity approach to solving real option problems," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1754-1779, June.
    11. Arturo Leccadito & Pietro Toscano & Radu S. Tunaru, 2012. "Hermite Binomial Trees: A Novel Technique For Derivatives Pricing," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 15(08), pages 1-36.
    12. Pier Giuseppe Giribone & Simone Ligato, 2016. "Flexible-forward pricing through Leisen–Reimer trees: Implementation and performance comparison with traditional Markov chains," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-21, June.
    13. Chiu, Chun-Yuan & Dai, Tian-Shyr & Lyuu, Yuh-Dauh & Liu, Liang-Chih & Chen, Yu-Ting, 2022. "Option pricing with the control variate technique beyond Monte Carlo simulation," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).

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