# On the binomial approximation of the American put

2 MATHRISK - Mathematical Risk Handling
UPEM - Université Paris-Est Marne-la-Vallée, ENPC - École des Ponts ParisTech, Inria de Paris
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.
Document type :
Journal articles
Domain :

Cited literature [11 references]

https://hal-upec-upem.archives-ouvertes.fr/hal-01709298
Contributor : Damien Lamberton <>
Submitted on : Monday, December 10, 2018 - 2:49:41 PM
Last modification on : Friday, October 4, 2019 - 1:38:36 AM
Long-term archiving on : Monday, March 11, 2019 - 2:26:03 PM

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BinomialApproximation2018R.pdf
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### Identifiers

• HAL Id : hal-01709298, version 2
• ARXIV : 1802.05614

### Citation

Damien Lamberton. On the binomial approximation of the American put. Applied Mathematics and Optimization, Springer Verlag (Germany), In press. ⟨hal-01709298v2⟩

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