Standard Trinomial Tree Setup
The standard trinomial tree (STT) is a binomial-like framework used for pricing equity options that extends the traditional binomial tree model by incorporating three potential price movements at each node: an upward movement, a downward movement, and a horizontal movement (no change in price). Setup a STT equity options tree model using the following functions:
Functions
stttimespec | Specify time structure for standard trinomial tree |
stttree | Build standard trinomial tree |
Topics
- Understanding Equity Trees
Financial Instruments Toolbox™ supports five types of recombining tree models to represent the evolution of stock prices.
- Pricing Equity Derivatives Using Trees
Pricing functions calculate the price of any set of supported instruments based on a binary equity price tree, an implied trinomial price tree, or a standard trinomial tree.
- Use treeviewer to Examine HWTree and PriceTree When Pricing European Callable Bond
This example demonstrates how to use
treeviewerto examine tree information for a Hull-White tree when you price a European callable bond.
