Which Model Better Values American Options: Binomial or Black Scholes?

  • Thread starter Thread starter courtrigrad
  • Start date Start date
  • Tags Tags
    Binomial
Click For Summary

Homework Help Overview

The discussion revolves around the comparison of two models for valuing American options: the binomial model and the Black-Scholes model. Participants are exploring the nuances of what it means to value American options, particularly in relation to their exercise before or on the expiry date.

Discussion Character

  • Conceptual clarification, Assumption checking, Mixed

Approaches and Questions Raised

  • Participants are questioning the definition of "valuing American options" and discussing the implications of different models. There are attempts to clarify the nature of options and their valuation, as well as suggestions to consider alternative methods.

Discussion Status

The discussion is ongoing, with some participants providing feedback and resources while others express confusion about the original question. There is no clear consensus, but various interpretations and perspectives are being explored.

Contextual Notes

Some participants have noted a lack of understanding regarding the terminology used in the original post, which may affect the clarity of the discussion. There are also hints of differing levels of familiarity with the subject matter among participants.

courtrigrad
Messages
1,236
Reaction score
2
Is this a good problem: Which is a better model for valuing American options: the binomial or the Black Scholes?

Any feedback is appreciated

Thanks :smile:

ps: sorry for the hiatus
 
Physics news on Phys.org
Umm...

What do you mean by 'valuing American options?'
 
finding the value of american options before or on the expiry date. Options are a contract where a person can buy (calll) or sell(put) an amount if it will benefit them.
 
I'm sorry, I don't know what you mean. I can't help you. Maybe this post belongs in the philosophy section, not homework help.
 
If you don't understand a question, perhaps it is better not to reply at all.

No, this is not a "philosophy" question, but it is an economics question.

I'm no expert in the field but googling on 'economics "Black Sholes"' and 'economics binomial', I found this web-site that might help:
http://www.princeton.edu/~wxiong/465/465_2004.html
 
Last edited by a moderator:
Maybe you should test a plain old straight line too. Depending on which level of statistics you're familiar with.
 
HallsofIvy said:
If you don't understand a question, perhaps it is better not to reply at all.
Yes, you're fully correct. I should have known better. :smile:
 
That's why I don't reply to MOST posts!
 

Similar threads

Correlating albedo with temperature?
  • · Replies 6 ·
Replies
6
Views
3K
Expected value of binomial distribution
  • · Replies 5 ·
Replies
5
Views
2K
Confusion Calculating Young's Modulus
  • · Replies 5 ·
Replies
5
Views
2K
Binomial Theorem and Electric Field question
  • · Replies 4 ·
Replies
4
Views
7K
Help Evaluating Mathematical Modelling of Physical Problems
  • · Replies 47 ·
2
Replies
47
Views
5K
Undergrad Binomial Distribution and Selection of Suitable Values
  • · Replies 3 ·
Replies
3
Views
2K
Stats: Approximating a binomial with a normal distribution
  • · Replies 6 ·
Replies
6
Views
3K
High School Why Does Black Hole Entropy and Information Loss Matter?
  • · Replies 7 ·
Replies
7
Views
2K
Graduate Negative Poisson-Binomial Distribution
  • · Replies 14 ·
Replies
14
Views
7K
High School Questions about the Eddington Limit and Super - Eddington black holes
  • · Replies 0 ·
Replies
0
Views
3K