Matlab在金融工程中的应用(peng liu)Lecture7_Matlab.pdfVIP

Matlab Workshop MFE 2006 Lecture 5 Stefano Corradin Peng Liu /peliu/computing Haas School of Business, Berkeley, MFE 2006 Applications in Finance III 5.1 Binomial Tree Valuation: - European and American Call and Put Option; - Sensitivities: Delta and Gamma; - Exotic Options: American Down-Out Call and American Spread Call Option. 5.2 Trinomial Tree Valuation: - European and American Put Option. Haas School of Business, Berkeley, MFE 2006 1 Binomial Tree Valuation Consider an N-period binomial model for a time period of T years: the length of each period is ∆t = T/N . In the continuous time model the stock price evolves according to GBM dS = (r − q)S dt + σS dB t t t t implying over a discrete time period ∆t ∆ log St = ν∆t + σ∆B 2 where ν = r − q − σ /2 and B is a Brownian motion under the risk neutral measure. The mean and the variance are 2 E [∆ log S] = ν∆t var [∆ log S] = σ ∆t. Haas School of Business, Berkeley, MFE 2006 2 In the binomial model, we assume that if the stock price is S at the beginning of the period it will be either uS or dS at the end of period where u and d are constants to be determined. Therefore we have to determine three parameters: - u, - d, - p (the probability of the up state). If we match mean and variance, we have p log u + (1 − p ) log d 2 p (1 −