• Multi-period binomial lattice: multiplicative price model • Multi-period binomial model : additive log price model • Constructing a binomial lattice for underlying
• European option pricing on a binomial lattice
Multi-period binomial lattice model
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One-period binomial model is crude, to improve it, we use it in a small interval ∆t only.
Specifically, let [0, T ] be partitioned into
t0 =0