Convergence Analysis of Binomial Tree Method for American-Type Path-Dependent Options∗
نویسندگان
چکیده
The pricing models of American-type path-dependent options are of degenerate parabolic obstacle problems. The binomial tree method is the most popular approach to pricing options. For some special cases, this method is modified in order to make it feasible. The main purpose of this paper is, using numerical analysis and the notion of viscosity solutions, to show the uniform convergence of the binomial tree method and a modified binomial tree method (i.e., forward shooting grid method) for American-type path-dependent options. Numerical experiments are given to demonstrate our conclusion.
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Convergence of Binomial Tree Methods for European/American Path-Dependent Options
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