-
trinomial model stock price converges to the geometric brownian motion:
- trinomial stock price ->
S(0)e^{u*M_{N}} - geometric brownian motion ->
S(0)e^{sigma*W(t)}
since
u = sigma*sqrt(h/2*p)we haveS(0)*e^{{sigma*sqrt(h/2*p)}*M_{N}}~S(0)e^{sigma*W(t)} - trinomial stock price ->
Testsuite
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