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Binomial options pricing has no closed-form solution

Article type: Research Article

Authors: Georgiadis, Evangelos

Affiliations: M.I.T. Cambridge, MA 02139 USA. E-mail: egeorg@mit.edu

Abstract: We set a lower bound on the complexity of options pricing formulae in the lattice metric by proving that no general explicit or closed form (hypergeometric) expression for pricing vanilla European call and put options exists when employing the binomial lattice approach. Our proof follows from Gosper's algorithm.

DOI: 10.3233/AF-2011-003

Journal: Algorithmic Finance, vol. 1, no. 1, pp. 13-16, 2011

Published: 23 December 2011
Price: EUR 27.50
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