Abstract
In this paper we study a binomial model with random time steps and explain how to calculate values for European and American call and put options. We prove weak convergence of the discrete processes to the Black{Scholes setup as well as convergence of the values for European and American put options. Computational experiments exhibit a smooth convergence structure and suggest that we can obtain an order of convergence of two via an extrapolation procedure. Approximations to jump {diffusions are straightforward.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
