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Journal Articles Applied Mathematics and Optimization Year : 2018

On the binomial approximation of the American put

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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Dates and versions

hal-01709298 , version 1 (14-02-2018)
hal-01709298 , version 2 (10-12-2018)

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Cite

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