Binomial Options Pricing Has No Closed-Form Solution
Massachusetts Institute of Technology (MIT)
February 28, 2011
Algorithmic Finance, Vol. 1, No. 1, 2011
We set a lower bound on the complexity of options pricing formulae in the lattice metric by proving that no general explicit or closed form (hypergeometric) expression for pricing vanilla European call and put options exists when employing the binomial lattice approach. Our proof follows from Gosper's algorithm.
Number of Pages in PDF File: 5
Keywords: algorithmic finance, complexity, options, hypergeometric, closed formAccepted Paper Series
Date posted: March 2, 2011
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