As a coursework, we are required to price a double barriers knock-in binary put option. We used finite difference method in 24 ways and multinomial lattice in 12 ways. We also implemented analytic and Markov chain method. At the end, we compared these four methods and Monte Carlo method.
In this coursework, we discussed the speed, convergence rate and monotonicity of convergence for these methods. We also discussed whether extrapolation improves convergence.
Ying Li (2021). An Example of Markov Chain and multinominal option pricing (https://www.mathworks.com/matlabcentral/fileexchange/19487-an-example-of-markov-chain-and-multinominal-option-pricing), MATLAB Central File Exchange. Retrieved .
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