Lu, Richard; Hsu, Yi-Hwa - In: International Journal of Business and Economics 4 (2005) 2, pp. 157-165
A binomial model is developed to value options when the underlying process follows the constant elasticity of variance (CEV) model. This model is proposed by Cox and Ross (1976) as an alternative to the Black and Scholes (1973) model. In the CEV model, the stock price change (dS) has volatility...