A New Combinatorial Algorithm for Pricing Options

publisher藤沢In financial markets, a prevalent computer method for pricing option contracts is that of multinomial trees. In this context, we introduce a new combinatorial algorithm which can cut down software running time, a factor becoming crucial in options trading boards, as buying and selling orders are placed by the thousands each minute. We also present a Matlab implementation of this new algorithm, in which all solution vectors are generated inside a single matrix, which helps handle variables more efficiently.