The Discrete Binomial Model for Option Pricing
نویسنده
چکیده
This paper introduces the notion of option pricing in the context of financial markets. The discrete time, one-period binomial model is explored and generalized to the multi-period binomial model. The multi-period model is then redeveloped using the sophisticated tools of martingale theory. The paper concludes with a brief extension of the results to continuous time, giving a heuristic derivation of the Black-Scholes equation.
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