#11
|
|||
|
|||
Re: Question on Black-Scholes model
[ QUOTE ]
When modeling American options the binomial model will not lead you to a Black-Scholes style solution. [/ QUOTE ] Sorry, I meant in the European case. This is becasue the cumulative binomial distribution converges to normal distribution in the limit. In general, American does not have an analytic solution...but if it would, then binomial would converge to the Black-Scholes. Also, it would be nice if some market makers besides RiverDancer explain what models they use in practice. If you don't use an advanced model, then why not? |
|
|