Looking Forward to Pricing Options from Binomial Trees
Dario Villani, Andrei E. Ruckestein
Abstract
We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. This reformulation allows us to write closed-form expressions for the value of European and American put barrier-options on a non-dividend-paying stock.
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