Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets

Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets

Random maps can be constructed from a priori knowledge of the financial assets. It is also addressed the reverse problem, i.e. from a function of an empirical stationary probability density function we set up a random map that naturally leads to an implied binomial tree, allowing the adjustment of m...

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Bibliographic Details
Main Authors: Antonio Airton Carneiro de Freitas, José Roberto Securato
Format: Article
Language:English
Published: Brazilian Society of Finance 2010-04-01
Series:Revista Brasileira de Finanças
Subjects:
binomial trees
options
random maps
Online Access:http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/1408/1579
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spelling doaj-44a3276653104a41918631f252d657882020-11-24T22:53:18ZengBrazilian Society of FinanceRevista Brasileira de Finanças1679-07311984-51462010-04-01812543Constructing Binomial Trees Via Random Maps for Analysis of Financial AssetsAntonio Airton Carneiro de FreitasJosé Roberto SecuratoRandom maps can be constructed from a priori knowledge of the financial assets. It is also addressed the reverse problem, i.e. from a function of an empirical stationary probability density function we set up a random map that naturally leads to an implied binomial tree, allowing the adjustment of models, including the ability to incorporate jumps. An applica- tion related to the options market is presented. It is emphasized that the quality of the model to incorporate a priori knowledge of the financial asset may be affected, for example, by the skewed vision of the analyst.http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/1408/1579binomial treesoptionsrandom maps
collection DOAJ
language English
format Article
sources DOAJ
author Antonio Airton Carneiro de Freitas
José Roberto Securato
spellingShingle Antonio Airton Carneiro de Freitas
José Roberto Securato
Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets
Revista Brasileira de Finanças
binomial trees
options
random maps
author_facet Antonio Airton Carneiro de Freitas
José Roberto Securato
author_sort Antonio Airton Carneiro de Freitas
title Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets
title_short Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets
title_full Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets
title_fullStr Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets
title_full_unstemmed Constructing Binomial Trees Via Random Maps for Analysis of Financial Assets
title_sort constructing binomial trees via random maps for analysis of financial assets
publisher Brazilian Society of Finance
series Revista Brasileira de Finanças
issn 1679-0731
1984-5146
publishDate 2010-04-01
description Random maps can be constructed from a priori knowledge of the financial assets. It is also addressed the reverse problem, i.e. from a function of an empirical stationary probability density function we set up a random map that naturally leads to an implied binomial tree, allowing the adjustment of models, including the ability to incorporate jumps. An applica- tion related to the options market is presented. It is emphasized that the quality of the model to incorporate a priori knowledge of the financial asset may be affected, for example, by the skewed vision of the analyst.
topic binomial trees
options
random maps
url http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/1408/1579
work_keys_str_mv AT antonioairtoncarneirodefreitas constructingbinomialtreesviarandommapsforanalysisoffinancialassets
AT joserobertosecurato constructingbinomialtreesviarandommapsforanalysisoffinancialassets
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