Convergence Rate of the Binomial Tree Scheme for Continuously Paying Options
نویسنده
چکیده
Continuously Paying Options (CPOs) form a very natural class of derivatives for hedging risks coming from adverse movements of a continuously traded asset. We study the rate of convergence of CPOs evaluated under the binomial tree scheme when the payout function φ is piecewise C subject to some boundedness conditions. We show that if φ is continuous, the rate of convergence is n−1 while it is n− 1 2 if φ is discontinuous.
منابع مشابه
The rate of convergence of the binomial tree scheme
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