Abstract
We propose a new algorithm for computing the Greeks in jump-diffusion settings using binomial trees. We further demonstrate that the Greeks for European options converge to the Malliavin Greeks in the continuous time model. Our proposed algorithm is efficient, because the price and the Greeks (Delta, Gamma, Vega, and Rho) can be computed simultaneously. Computation of the Greeks for American options is also discussed.
Original language | English |
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Pages (from-to) | 93-110 |
Number of pages | 18 |
Journal | Journal of Economic Dynamics and Control |
Volume | 51 |
DOIs | |
Publication status | Published - 2015 Feb 1 |
Keywords
- Binomial tree
- Greeks
- Jump-diffusion model
- Options
ASJC Scopus subject areas
- Economics and Econometrics
- Control and Optimization
- Applied Mathematics