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Option convergence rate with geometric random walks approximations
Leduc, Guillaume
Leduc, Guillaume
Date
2016
Authors
Advisor
Type
Peer-Reviewed
Article
Published version
Article
Published version
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Abstract
We describe a broad setting under which, for European options, if the underlying asset form a geometric random walk then, the error with respect to the Black–Scholes model converges to zero at a speed of 1/𝑛 for continuous payoffs functions, and at a speed of 1∕√𝑛 for discontinuous payoffs functions.