Article ID: | iaor19921359 |
Country: | United States |
Volume: | 37 |
Issue: | 12 |
Start Page Number: | 1640 |
End Page Number: | 1652 |
Publication Date: | Dec 1991 |
Journal: | Management Science |
Authors: | Ritchken Peter, Kamrad Bardia |
Keywords: | investment, stochastic processes |
Contingent claims whose values depend on multiple sources of uncertainty arise in many financial contracts and in the analysis of real projects. Unfortunately closed form solutions for these options are rare and numerical methods can be computationally expensive. This article extends the literature on multinomial approximating models. Specifically, new multinomial models are presented that include as special cases existing models. The more general models are shown to be computationally more efficient.