Abstract
Trinomial tree model is excelled than binomial tree model in precision and calculation from an example. Triple Tree pricing error is much smaller, the result is simpler. By careful analysis, we conclude the real option value under trinomial tree model.
Highlights
The numerical computation of real option value is very important in the evaluating of venture investment
Trinomial tree model is excelled than binomial tree model in precision and calculation from an example
We develop a trinomial tree pricing model of the real option, and prove that the equation of real option value under trinomial tree model is approximate to Black-Scholes equation
Summary
The numerical computation of real option value is very important in the evaluating of venture investment. Trinomial tree model is excelled than binomial tree model in precision and calculation from an example. We conclude the real option value under trinomial tree model. Trinomial Tree Model, Binomial Tree Model, Equation of Real Option Value
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