Tseng, Chung-Li; Miao, Daniel Wei-Chung; Chung, San-Lin; … - In: Journal of Risk and Financial Management 14 (2021) 6, pp. 1-32
In this paper, we focus on two-factor lattices for general diffusion processes with state-dependent volatilities. Although it is common knowledge that branching probabilities must be between zero and one in a lattice, few methods can guarantee lattice feasibility, referring to the property that...