Binomial Options Pricing Has No Closed-Form Solution

5 Pages Posted: 11 Dec 2014  

Evangelos Georgiadis

Massachusetts Institute of Technology (MIT)

Date Written: February 28, 2011

Abstract

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.

Keywords: algorithmic finance, complexity, options, hypergeometric, closed form

Suggested Citation

Georgiadis, Evangelos, Binomial Options Pricing Has No Closed-Form Solution (February 28, 2011). Algorithmic Finance, Vol. 1, No. 1, 2011. Available at SSRN: https://ssrn.com/abstract=1773170

Evangelos Georgiadis (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Paper statistics

Downloads
3,447
Rank
2,075
Abstract Views
33,923