11.1
Bino ial Trees
A useful and very popular technique for pricing an option involves constructing a
binomial tree. This is a diagram representing dierent possible paths that might be
followed by the stock price over the life of an option. The unde
3
Random variables
OUTLINE
discrete and continuous random variables
expected value and variance
uniform and normal distributions
Central Limit Theorem
3.1 Motivation
The mathematical ideas that we develop in this book are going to involve random
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225 in Tokyo,
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HOMAS A. BASS (Bass, 1999)
ential gain
nt.
{T ALMGREN (Almgren, 2002)
1r old Ford.
rs.
he ask, selling price.
HOMAS A. BASS (Bass, 1999)
mm needs a new car.
A. L. H. SMITH (Smith, 1986)
.ing gone awry.
IDE JOHNSON (Johns
Options
Wednesday, January 20, 2016
1:26 PM
Index: DOJ,
SPSOD, NASDAQ
Currency
European Options
How much should the holder pay for having
that option?
European Call Options give their holder, the
potential buyer, the right but no obligation to buy
a