FIN 5601 - Financial Technology - Fall 2014

1.b) CRR Method

>> EuroCRR(50,50,.05,1,.3,.01,100,1)

ans =

	6.7936

2.b) CRR Oscillatory Convergence

>> ConvergenceCRR(50,50,.05,1,.3,.01,50,1)
% Oscillates above and below.

  3.a) CRR Convergence - Even

>> ConvergenceCRREven(50,50,.05,1,.3,.01,50,1)
%Converges smoothly from below.

  3.b) CRR Convergence - Odd

>> ConvergenceCRROdd(50,50,.05,1,.3,.01,50,1)
% Converges smoothly from above.

  5) Generalized Binomial Methods

>> Binomial(50,47,.05,1,.3,.01,100,1,0,'EQP')

ans =

	8.3236

>> Binomial(50,47,.05,1,.3,.01,100,1,0,'TIAN')

ans =

	8.3186

>> Binomial(50,47,.05,1,.3,.01,100,1,0,'CRR')

ans =

	8.3217

>> Binomial(50,47,.05,1,.3,.01,100,1,0,'LR')

ans =

	8.3067

References

• Brandimarte, Paolo. Numerical Methods in Finance and Economics: A MATLAB-based Introduction. Hoboken, NJ: Wiley Interscience, 2006. Print.

• Haug, Espen, Gaarder. The Complete Guide to Option Pricing Formulas. New York, NY: McGraw-Hill, 2006. Print.