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The decoupling approach to binomial pricing of multi-asset options

 
: Korn, R.; Müller, S.

The journal of computational finance 12 (2009), 3, S.1-30
ISSN: 1460-1559
Englisch
Zeitschriftenaufsatz
Fraunhofer ITWM ()

Abstract
We introduce a decoupling method for the approximation of lognormal stock price processes using multivariate binomial trees and compare it with standard multivariate approaches. The advantages of the decoupling approach are the separation of the correlation structure of the underlying stock price process from the approximating binomial tree, the multiplicative form of the tree and its numerical performance.

: http://publica.fraunhofer.de/dokumente/N-150051.html