Review of Financial Studies Vol. 2 No. 2 1989
The Multinomial Option Pricing Model and its Brownian and Poisson Limits
Abstract
[The Cox, Ross, and Rubinstein binomial model is generalized to the multinomial case. Limits are investigated and shown to yield the Black-Scholes formula in the case of continuous sample paths for a wide variety of complete market structures. In the discontinuous case a Merton-type formula is shown to result, provided jump probabilities are replaced by their corresponding Arrow-Debreu prices.]
- Volume
- 2
- Issue
- 2
- Pages
- 251-265
- Sources
- bibtex:phds-export.bib