Convergence of binomial tree methods to Black Scholes model on determining stock option prices

3rd Indonesian Operations Research Association - International Conference on Operations Research 2018

计算机科学

Riaman^1 ; Parmikanti, K.^1 ; Irianingsih, I.^1 ; Joebaedi, K.^1 ; Supian, S.^1

Department of Mathematics, Universitas Padjadjaran, 45363, Indonesia^1

关键词: Binomial tree method;    Black-Scholes;    Black-Scholes model;    European option;    Interest rates;    Option price;    Option pricing;    Stock options;   

Others  :  https://iopscience.iop.org/article/10.1088/1757-899X/567/1/012013/pdf
DOI  :  10.1088/1757-899X/567/1/012013

学科分类：计算机科学（综合）

来源: IOP

【 摘 要 】

There are many alternative investment tools that can be used to be the choice of investors. One of them is a derivative product. Derivative products that are more widely known and traded on financial markets are options. Option is a contract or agreement between two parties to buy or sell an instrument. To minimize risk, it is necessary to determine the option price by determining the fair price of the option. This option pricing can be done by using the Binomial Tree method and the Black Scholes method. Some factors that influence options are stock prices, strike prices, maturity, volatility, and interest rates. This paper discusses the European option pricing call on the shares of Bank Central Asia (BCA) with the Binomial Tree method and the Black Scholes Method. From the results of the research, it is found that the Binomial Tree method will converge to the Black Scholes method if the time partition increases.