A European option general first-order error formula
We study the value of European security derivatives in the Black-Scholes model, when the underlying asset is approximated by random walks (). We obtain an explicit error formula, up to a term of order (⁻³/² ), which is valid for general approximating schemes and general payoff functions. We show how...
محفوظ في:
| المؤلف الرئيسي: | |
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| التنسيق: | article |
| منشور في: |
2013
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| الموضوعات: | |
| الوصول للمادة أونلاين: | http://hdl.handle.net/11073/16668 |
| الوسوم: |
إضافة وسم
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| الملخص: | We study the value of European security derivatives in the Black-Scholes model, when the underlying asset is approximated by random walks (). We obtain an explicit error formula, up to a term of order (⁻³/² ), which is valid for general approximating schemes and general payoff functions. We show how this error formula can be used to find random walks (), for which option values converge at a speed of (⁻³/² ). |
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