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

[courtrigrad]

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

ps: sorry for the hiatus

 

[z-component]

Umm...

What do you mean by 'valuing American options?'

 

[courtrigrad]

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.

 

[z-component]

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.

 

[HallsofIvy]

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

 

[danne89]

Maybe you should test a plain old straight line too. Depending on which level of statistics you're familiar with.

 

[z-component]

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.

 

[HallsofIvy]

That's why I don't reply to MOST posts!