期刊名称：Quantitative and Qualitative Analysis in Social Sciences
印刷版ISSN：1752-8925
出版年度：2008
卷号：2
期号：2
页码：63-70
出版社：Quantitative and Qualitative Analysis in Social Sciences
摘要：In the existing literature on barrier options, much e.ort has been exerted to ensure convergence throughplacing the barrier in close proximity to, or directly onto, the no des of the tree lattice. In this paper weshow that this may not be necessary to achieve accurate option price approximations. Using the Cox-Ross-Rubinstein binomial tree model and a suitable transition probability adjustment we demonstratethat our "probability-adjusted" model exhibits increased convergence to the analytical option price.For options whose strike price is close to the barrier we are able to obtain numerical results whereother mo dels fail and, although convergence tends to be slow, we are able to calculate reasonableapproximations to the analytical option price without having to reposition the lattice nodes
关键词：Barrier option; binomial tree; convergence rate; transition probability
