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A binomial tree to price European options

Brogi, Athos (2010): A binomial tree to price European options. Published in: PHD Theses in Statistics and Applications: book of short papers , Vol. 1, No. 1 (February 2010): pp. 111-116.

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Abstract

A time-changing volatility binomial tree to price European options is presented followed by an algorithm explaining how to implement the tree. Finally, the advantages of the model are listed and a simulation is carried out showing that the distribution of prices simulated along the tree is skewed and leptokurtic.

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