The Binomial option pricing model plays an integral role in modern nance
due to its simplicity to implement and pedagogical value. There are two ways
of extending the Binomial model on one source of underlying risk. The rst
is to expand the number of possible states after each time step which results
in the multinomial model. The second is to increase the number of sources of
underlying risk. In this dissertation, the extension of the Binomial model in
both cases is discussed.
Numerical investigation is done to evaluate convergence patterns and computational
intensity of a number of non-vanilla options. These include rainbow,
basket and digital options, as well as convertible bonds. Theoretical and actual
convergence is discussed and compared. / Dissertation (MSc)--University of Pretoria, 2014. / lk2014 / Mathematics and Applied Mathematics / MSc / Unrestricted
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:up/oai:repository.up.ac.za:2263/43267 |
| Date | January 2014 |
| Creators | Van Biljon, Johannes Barend |
| Contributors | Mare, Eben, johan.vanbiljon@standardbank.co.za |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Dissertation |
| Rights | © 2014 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
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