IDEAS home Printed from https://ideas.repec.org/a/wly/jfutmk/v29y2009i9p826-839.html
   My bibliography  Save this article

Trinomial or binomial: Accelerating American put option price on trees

Author

Listed:
  • Jiun Hong Chan
  • Mark Joshi
  • Robert Tang
  • Chao Yang

Abstract

We investigate the pricing performance of eight trinomial trees and one binomial tree, which was found to be most effective in an earlier study, under 20 different implementation methodologies for pricing American put options. We conclude that the binomial tree, the Tian third‐order moment‐matching tree with truncation, Richardson extrapolation, and smoothing, performs better than the trinomial trees. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:826–839, 2009

Suggested Citation

  • Jiun Hong Chan & Mark Joshi & Robert Tang & Chao Yang, 2009. "Trinomial or binomial: Accelerating American put option price on trees," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 29(9), pages 826-839, September.
    • Handle: RePEc:wly:jfutmk:v:29:y:2009:i:9:p:826-839
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luca Vincenzo Ballestra, 2021. "Enhancing finite difference approximations for double barrier options: mesh optimization and repeated Richardson extrapolation," Computational Management Science, Springer, vol. 18(2), pages 239-263, June.
    2. 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.
    3. Jin, Xing & Li, Xun & Tan, Hwee Huat & Wu, Zhenyu, 2013. "A computationally efficient state-space partitioning approach to pricing high-dimensional American options via dimension reduction," European Journal of Operational Research, Elsevier, vol. 231(2), pages 362-370.
    4. Guillaume Leduc & Merima Nurkanovic Hot, 2020. "Joshi’s Split Tree for Option Pricing," Risks, MDPI, vol. 8(3), pages 1-26, August.
    5. J. X. Jiang & R. H. Liu & D. Nguyen, 2016. "A Recombining Tree Method For Option Pricing With State-Dependent Switching Rates," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-26, March.
    6. Dasheng Ji & B. Brorsen, 2011. "A recombining lattice option pricing model that relaxes the assumption of lognormality," Review of Derivatives Research, Springer, vol. 14(3), pages 349-367, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jfutmk:v:29:y:2009:i:9:p:826-839. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/0270-7314/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.