Historically, financial and insurance risks were separate subjects most often analyzed using
qualitative methods. The development of quantitative methods based on stochastic analysis …

Continuous time Markov chain (CTMC) approximation is an intuitive and powerful method
for pricing options in general Markovian models. This paper analyzes how grid design …

Mijatović and Pistorius proposed an efficient Markov chain approximation method for pricing
European and barrier options in general one‐dimensional Markovian models. However …

In this paper we develop an efficient tree approach for option pricing when the underlying
asset price follows a regime-switching model. The tree grows only linearly as the number of …

We extend a framework based on Mellin transforms and show how to modify the approach to
value American call options on dividend-paying stocks. We present a new integral equation …

Binomial Trees in Option Pricing—History, Practical Applications and Recent Developments
Page 1 Binomial Trees in Option Pricing—History, Practical Applications and Recent …

A new family of binomial trees as approximations to the Black–Scholes model is introduced.
For this class of trees, the existence of complete asymptotic expansions for the prices of …

We introduce a decoupling method for the approximation of lognormal stock price processes
using multivariate binomial trees and compare it with standard multivariate approaches. The …

We study 20 different implementation methodologies for each of 11 different choices of
parameters of binomial trees and investigate the speed of convergence for pricing American …

In this paper, we study the rate of convergence of the European barrier call option price
given by the CRR binomial model to the Black–Scholes price as the number of periods n …