A direct justification of the binomial pricing model as an approximation of the black-scholes formula | [Pakistan Journal of Statistics • 2010]

Author(s):

1. Sianggui Qu: Department of Mathematics & Statistics, Oakland University, Rochester, United States

Abstract:

This paper pedagogically presents a proof of the binomial option pricing model as an approximation of the Black-Scholes formula. The proof only requires basic calculus and a direct approximation of the binomial probability by the normal distribution is used.

Page(s): 187-193

DOI: DOI not available

Published: Journal: Pakistan Journal of Statistics, Volume: 26, Issue: 1, Year: 2010

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