Bhat, Harish S.; Kumar, Nitesh - In: European Journal of Operational Research 223 (2012) 3, pp. 762-774
We examine a Markov tree (MT) model for option pricing in which the dynamics of the underlying asset are modeled by a non-IID process. We show that the discrete probability mass function of log returns generated by the tree is closely approximated by a continuous mixture of two normal...