The binomial model is a standard framework used to introduce risk neutral pricing of financial assets. Martingale representation, backward stochastic differential equations, and the Malliavin calculus are difficult concepts in a continuous-time setting. This paper presents these ideas in the simple, discrete-time binomial model.
|Number of pages||8|
|Journal||Applied Stochastic Models in Business and Industry|
|Early online date||13 Feb 2018|
|Publication status||Published - 1 Nov 2018|
- Backward stochastic differential equation
- Binomial model
- Malliavin calculus