The DOI matches its Crossref record; 25 of the 25 references it cites were found in a registry or an index.
Simple Binomial Processes as Diffusion Approximations in Financial Models
Abstract
A binomial approximation to a diffusion is defined as “computationally simple” if the number of nodes grows at most linearly in the number of time intervals. It is shown how to construct computationally simple binomial processes that converge weakly to commonly employed diffusions in financial models. The convergence of the sequence of bond and European option prices from these processes to the corresponding values in the diffusion limit is also demonstrated. Numerical examples from the constant elasticity of variance stock price and the Cox, Ingersoll, and Ross (1985) discount bond price are provided.
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Citations
Cites
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
Convergence of Probability Measures
Billingsley, P. (1999) · Wiley Series in Probability and Statistics · doi:10.1002/9780470316962 · Cited by 13,910
A Theory of the Term Structure of Interest Rates
Cox, J. C., Ingersoll, J. E., & Ross, S. A. (1985) · Econometrica · doi:10.2307/1911242 · Cited by 8,271
Theory of Rational Option Pricing
Merton, R. C. (2019) · World Scientific Reference on Contingent Claims Analysis in Corporate Finance · doi:10.1142/9789814759588_0002 · Cited by 7,948
Theory of rational option pricing
Merton, R. C. (2005) · Theory of Valuation · doi:10.1142/9789812701022_0008 · Cited by 7,161
An equilibrium characterization of the term structure
Vasicek, O. (1977) · Journal of Financial Economics · doi:10.1016/0304-405x(77)90016-2 · Cited by 6,085
Option pricing: A simplified approach
Cox, J. C., Ross, S. A., & Rubinstein, M. (1979) · Journal of Financial Economics · doi:10.1016/0304-405x(79)90015-1 · Cited by 6,083
Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case
Merton, R. C. (1969) · The Review of Economics and Statistics · doi:10.2307/1926560 · Cited by 5,187
Markov Processes: Characterization and Convergence.
Abakuks, A., Ethier, S. N., & Kurtz, T. G. (1987) · Biometrics · doi:10.2307/2531839 · Cited by 4,233
Markov Processes: Characterization and Convergence
Ethier, S. N., & Kurtz, T. G. (1986) · Wiley Series in Probability and Statistics · doi:10.1002/9780470316658 · Cited by 3,634
Cited by
RUBINSTEIN, M. (1994) · The Journal of Finance · doi:10.1111/j.1540-6261.1994.tb00079.x · Cited by 1,744
Jump Diffusion Option Valuation in Discrete Time
AMIN, K. I. (1993) · The Journal of Finance · doi:10.1111/j.1540-6261.1993.tb05130.x · Cited by 320
20 Testing option pricing models
Bates, D. S. (1996) · Handbook of Statistics · doi:10.1016/s0169-7161(96)14022-0 · Cited by 267
Metadata
- Authors
- Nelson, D. B., & Ramaswamy, K.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 1990-07
- Volume
- 3
- Issue
- 3
- Pages
- 393-430
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W2155664708
- Cited by
- 379
- References
- 25
- FWCI
- 9.66
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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