Discrete market models
In this chapter we describe market models in discrete time to price and hedge European and American-style derivatives. We present the classical model introduced by Cox, Ross and Rubinstein in  and we mention briefly the pricing problem in incomplete markets. General references on topics covered in this chapter are Dana and Jeanblanc , Föllmer and Schied , Lamberton and Lapeyre , Pliska , Shreve , van der Hoek and Elliott : we also mention Pascucci and Runggaldier  where several examples and exercises can be found.
KeywordsRisky Asset Call Option American Option Underlying Asset Hedging Strategy
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