Abstract
This final chapter discusses numerical effects on tree methods. Furthermore, binomial, trinomial and multinomial trees will be interpreted as Markov chain approximations of solutions of SDEs. General higher order Markov chain approximations with given weak order of convergence will be described. In addition, the relationship with finite difference methods will be highlighted towards the end of the chapter. It is worth pointing out that jump diffusions can be rather easily approximated in a similar manner as will be described.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2010 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Platen, E., Bruti-Liberati, N. (2010). Trees and Markov Chain Approximations. In: Numerical Solution of Stochastic Differential Equations with Jumps in Finance. Stochastic Modelling and Applied Probability, vol 64. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-13694-8_17
Download citation
DOI: https://doi.org/10.1007/978-3-642-13694-8_17
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-12057-2
Online ISBN: 978-3-642-13694-8
eBook Packages: Mathematics and StatisticsMathematics and Statistics (R0)