dc.contributor.author | Leduc, Guillaume | |
dc.contributor.author | Hot, Merima Nurkanovic | |
dc.date.accessioned | 2021-04-27T06:59:47Z | |
dc.date.available | 2021-04-27T06:59:47Z | |
dc.date.issued | 2020 | |
dc.identifier.citation | Leduc, G.; Nurkanovic Hot, M. Joshi’s Split Tree for Option Pricing. Risks 2020, 8, 81. https://doi.org/10.3390/risks8030081 | en_US |
dc.identifier.issn | 2227-9091 | |
dc.identifier.uri | http://hdl.handle.net/11073/21450 | |
dc.description.abstract | In a thorough study of binomial trees, Joshi introduced the split tree as a two-phase binomial tree designed to minimize oscillations, and demonstrated empirically its outstanding performance when applied to pricing American put options. Here we introduce a “flexible” version of Joshi’s tree, and develop the corresponding convergence theory in the European case: we find a closed form formula for the coefficients of 1/n and 1/n³/² in the expansion of the error. Then we define several optimized versions of the tree, and find closed form formulae for the parameters of these optimal variants. In a numerical study, we found that in the American case, an optimized variant of the tree significantly improved the performance of Joshi’s original split tree. | en_US |
dc.description.sponsorship | American University of Sharjah | en_US |
dc.language.iso | en_US | en_US |
dc.publisher | MDPI | en_US |
dc.relation.uri | https://doi.org/10.3390/risks8030081 | en_US |
dc.subject | Binomial option pricing | en_US |
dc.subject | Error analysis for non-self-similar binomial trees | en_US |
dc.subject | American options | en_US |
dc.subject | Black–Scholes | en_US |
dc.title | Joshi’s Split Tree for Option Pricing | en_US |
dc.type | Peer-Reviewed | en_US |
dc.type | Article | en_US |
dc.type | Published version | en_US |
dc.identifier.doi | 10.3390/risks8030081 | |