Thursday, February 5, 2015

In option pricing when the binomial result equal to black scholes result?

In option pricing when the binomial result equal to black scholes result?
When the binomial tree has a large numbers of steps (i.e. the time interval between nodes is very small).
The spreadsheet in the related link prices options using Black-Scholes analytical equations and a binomial tree. As the number of steps in the binomial tree increase, the results of both approaches becomes equal to many decimal places.

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