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Random binomial tree models and put options

Ganikhodjaev, Nasir and Bayram, Kamola (2012) Random binomial tree models and put options. In: 2nd International Conference on Mathematical Applications in Engineering (ICMAE2012), 3-5 July 2012, Kuala Lumpur, Malaysia.

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Abstract

In this paper we introduce and study the simplest random binomial tree model. Usual binomial tree model is prescribed by pair of numbers (u, d), where u denotes the increase rate of the stock over the fixed period of time and d denotes the decrease rate, with 0< d < 1< u. We call the pair (u, d) an environment of the binomial tree model. A pair (Un, Dn), where {Un} and {Dn} are the sequences of independent, identically distributed random variables with 0< Dn < 1< Un for all n, is called a random environment and binomial tree model with random environment is called random binomial tree model. In this paper we define and study European put option for such models.

Item Type: Conference or Workshop Item (Full Paper)
Additional Information: 4430/26982
Uncontrolled Keywords: binomial tree model, random walk in random environment, European call option
Subjects: Q Science > QA Mathematics
Kulliyyahs/Centres/Divisions/Institutes: Kulliyyah of Science > Department of Computational and Theoretical Sciences
Depositing User: Prof. Nasir Ganikhodjaev
Date Deposited: 31 Dec 2012 10:56
Last Modified: 14 Feb 2013 04:43
URI: http://irep.iium.edu.my/id/eprint/26982

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