Using Binomial Tree Pricing Model in a Fuzzy Market

A model of using binomial tree pricing formulae in a fuzzy market is proposed. In the fuzzy market, a price interval can be got according to the belief degree. The rule for the reasonability of the price interval is proposed. The explicit expression of the interval is discussed in some special settings.

A Modified Binomial Tree Method for Currency Lookback Options

The binomial tree method is the most popular numerical approach to pricing options. However,for currency lookback options,this method is not consistent with the corresponding continuous models,which leads to slow speed of convergence.On the basis of the PDE approach,we develop a consistent numerical scheme called the modified binomial tree method.It possesses one order of accuracy and its efficiency is demonstrated by numerical experiments.The convergence proofs are also produced in terms of numerical analysis and the notion of viscosity solution.

Binomial Tree Pricing Model of Convertible Bond with Default Risk

In this paper we use a binomial tree to price convertible bond with default risk. A new way about pricing convertible bonds is proposed, which belongs to the deduced form approach. Firstly an inhomogeneous Possion process is used to describe default event and definition of default time. Secondly we combine the stock binomial tree with default intensity and obtain a new tree, then convertible bonds are priced according to the combined tree. It is worth pointing out that the model have following characters： simple, intuitive and having the strong ability to combine other items in convertible bonds＇ indenture.

Option Pricing Method in a Market Involving Interval Number Factors

The method for pricing the option in a market with interval number factors is proposed. The no-arbitrage principle in the interval number valued market and the rule to judge the reasonability of a price interval are given. Using the method, the price interval where the riskless interest and the volatility under B-S setting is given. The price interval from binomial tree model when the key factors u, d, R are all interval numbers is also discussed.

A Binomial Model of Asset and Option Pricing with Heterogeneous Beliefs

This paper provides a difference-in-opinions equilibrium framework for pricing asset and option in a multi-period binomial economy with heterogeneous beliefs.Agents agree to disagree about their beliefs on the probability and asset return in each state of nature.By constructing a consensus belief,we examine the impact of heterogeneous beliefs on market equilibrium.We show that agents'wealth shares are expected to remain the same under the consensus belief,although they are expected to increase under their own beliefs.Also large disagreement leads to lower risk premium,while high disagreement on the future return in up state(down state)leads to lower(higher)risk-free rate and expected return for the risky asset.Furthermore,under the consensus belief,the implied volatility of the call options exhibits some observed patterns widely documented in option markets.

AN ACCURATE BINOMIAL MODEL FOR PRICING AMERICAN ASIAN OPTION

This paper presents simple and fast algorithms for computing very tight upper and lower bounds on the prices of American Asian options in the binomial model.The authors choose two types sets of the actual arithmetic average prices,instead of the simulated values in other existing models,as the representative average prices at each node of the binomial tree.This approach simplifies effectively the computation and reduces the error caused by the linear interpolation.Numerical results show that the approach produces accurate upper and lower bounds compared to the other existing methods based on the binomial tree.