Modelling jumps with a tree typo

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Modelling jumps with a tree typo

Postby jmpactuary15 » Tue Nov 10, 2015 7:13 pm

Hello,

At the beginning of section 15.2 should the first two possible prices be

$S_t(1+\mu\Delta t - \sigma\sqrt{\Delta t}), S_t(1+\mu\Delta t + \sigma\sqrt{\Delta t})$

instead of

$S_t(1+\mu\Delta t - sqrt{\sigma}\Delta t), S_t(1+\mu\Delta t + \sqrt{\sigma}\Delta t)$?

[One can obtain these by taking the exponential of formula 3.14 and then expanding to terms of order $\Delta t$]
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Re: Modelling jumps with a tree typo

Postby mj » Mon Nov 23, 2015 5:17 am

yes
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