Korn, Ralf; Müller, Stefanie - In: Finance and Stochastics 17 (2013) 1, pp. 135-160
We introduce the optimal-drift model for the approximation of a lognormal stock price process by an accelerated binomial scheme. This model converges with order o(1/N), which is superior compared to today’s benchmark methods. Our approach is based on the observation that risk-neutral binomial...