Trinomial Model 1
Please follow link to code:
https://sites.google.com/view/vinegar...
In this video, I outline the Trinomial Option Pricing model originally pioneered by Phelim Boyle. There are many parameterizations possible for the trinomial model - here we use the parameterization considered in the Haug text book: The Complete Guide to Option Pricing Formulas 2nd Edition, chapter 7. One approach to constructing trinomial trees is to develop two steps of a binomial in combination as a single step of a trinomial tree. This can be engineered with many binomials CRR(1979), JR(1979) and Tian (1993) where the volatility is constant. For example, a two-step presentation of the CRR(1979) is developed here in C++ with excel visualization.
I present two snippets of C++ code which are investigated for efficiency. I compare the performance of a static vs dynamic memory designs when applied to trinomial lattice pricing models. The former I extracted from Volopta.com by Fabrice Rouah. The Dynamic representations was developed using Espen Haug's Excel VBA trinomial tree. Espen's dynamic tree design appears to be more efficient and can reach a higher step size in the onlinegdb C++ compiler. Later, we implement same in Google Colab:
• American Call Option estimation using Trin...