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On the binomial approximation of the American put

Damien Lamberton 1, 2
2 MATHRISK - Mathematical Risk Handling
Inria de Paris, ENPC - École des Ponts ParisTech, UPEM - Université Paris-Est Marne-la-Vallée
Abstract : We consider the binomial approximation of the American put price in the Black-Scholes model (with continuous dividend yield). Our main result is that the error of approximation is O((ln n) α /n) where n is the number of time periods and the exponent α is a positive number, the value of which may differ according to the respective levels of the interest rate and the dividend yield.
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Contributor : Damien Lamberton <>
Submitted on : Wednesday, February 14, 2018 - 6:19:42 PM
Last modification on : Thursday, March 19, 2020 - 12:26:02 PM
Long-term archiving on: : Monday, May 7, 2018 - 8:08:06 AM


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  • HAL Id : hal-01709298, version 1
  • ARXIV : 1802.05614


Damien Lamberton. On the binomial approximation of the American put. 2018. ⟨hal-01709298v1⟩



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