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 spee...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.展开更多
基金Supported by National Science Foundation of China (No.19871062)
文摘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.
