Search results for "Trinomial"
showing 4 items of 4 documents
On the Irrelevance of Expected Stock Returns in the Pricing of Options in the Binomial Model: A Pedagogical Note
2005
The option pricing theory is now either a standard or a main part of many financial courses on both intermediate and advanced levels. All the textbooks that include the option pricing theory present a detailed treatment of the binomial model. However, the binomial model, although quite simple and intuitive in appearance, is rather tricky when it comes to its practical implementations and applications. In fact, it is amazing that the students often get totally confused when it finally comes to the issue of the choice of the parameters of the binomial model. The reason for all this confusion lies in the fact that all the textbooks emphasize the irrelevance of the binomial option price from th…
Valuation of Barrier Options in a Black-Scholes Setup with Jump Risk
1999
This paper discusses the pitfalls in the pricing of barrier options approximations of the underlying continuous processes via discrete lattice models. These problems are studied first in a Black-Scholes model. Improvements result from a trinomial model and a further modified model where price changes occur at the jump times of a Poisson process. After the numerical difficulties have been resolved in the Black-Scholes model, unpredictable discontinuous price movements are incorporated.
Testing for goodness rather than lack of fit of an X–chromosomal SNP to the Hardy-Weinberg model
2019
The problem of checking the genotype distribution obtained for some diallelic marker for compatibility with the Hardy-Weinberg equilibrium (HWE) condition arises also for loci on the X chromosome. The possible genotypes depend on the sex of the individual in this case: for females, the genotype distribution is trinomial, as in the case of an autosomal locus, whereas a binomial proportion is observed for males. Like in genetic association studies with autosomal SNPs, interest is typically in establishing approximate compatibility of the observed genotype frequencies with HWE. This requires to replace traditional methods tailored for detecting lack of fit to the model with an equivalence test…
Researching Conditional Probability Problem Solving
2014
The chapter is organized into two parts. In the first one, the main protagonist is the conditional probability problem. We show a theoretical study about conditional probability problems, identifying a particular family of problems we call ternary problems of conditional probability. We define the notions of Level, Category and Type of a problem in order to classify them into sub-families and in order to study them better. We also offer a tool we call trinomial graph that functions as a generative model for this family of problems. We show the syntax of the model that allows researchers and teachers to translate a problem in terms of the trinomial graphs language, and the consequences of th…