The Infona portal uses cookies, i.e. strings of text saved by a browser on the user's device. The portal can access those files and use them to remember the user's data, such as their chosen settings (screen view, interface language, etc.), or their login data. By using the Infona portal the user accepts automatic saving and using this information for portal operation purposes. More information on the subject can be found in the Privacy Policy and Terms of Service. By closing this window the user confirms that they have read the information on cookie usage, and they accept the privacy policy and the way cookies are used by the portal. You can change the cookie settings in your browser.
In this chapter, we review two famous models on binomial option pricing, Rendleman and Barter (RB 1979) and Cox et al. (CRR 1979). We show that the limiting results of the two models both lead to the celebrated Black-Scholes formula. From our detailed derivations, CRR is easy to follow if one has the advanced level knowledge in probability theory but the assumptions on the model parameters make its...
In this chapter, we first introduce normal distribution, lognormal distribution, and their relationship. Then we discuss multivariate normal and lognormal distributions. Finally, we apply both normal and lognormal distributions to derive Black-Scholes formula under the assumption that the rate of stock price follows a lognormal distribution.
Set the date range to filter the displayed results. You can set a starting date, ending date or both. You can enter the dates manually or choose them from the calendar.