Option pricing is a well covered area, with many approaches available. One of the best known methods for pricing of options was proposed by Cox, Ross, and Rubenstein in 1979: the binomial tree model. Their approach works well for both European options and American options, but has to be tweaked for American options, to allow for the possibility of early exercise. After reviewing the pricing of European options on binomial tree models, this project proceeds with studying the pricing of American options, and provides a method for visualising how the value of the option evolves within the model.
This folder contains the Final Year Research Project PDF file.
This folder contains the accompanying notebooks that contain the visualisation tool developed for American Put and Call options.
For AmericanCall1.ipynb and AmericanPut1.ipynb, the constraint used is.
For AmericanCall2.ipynb and AmericanTut2.ipynb, the constraint used is.