5885数理金融中等数值题medium
Tree Versus Black-Scholes Convergence
题目
A one-step CRR binomial tree prices an at-the-money one-year European call at 9.95, while the Black-Scholes value with the same spot, strike, rate and volatility is 8.43. By how much does the coarse tree overprice the option, and what single change to the tree would most directly shrink this error?
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