Homework Set 3
Math 456
Topics in Financial Mathematics
Prof. Wickerhauser
Read Chapters 5 and 6 of the textbook, "Binomial Models In Finance" by
John van der Hoek and Robert J. Elliott
NOTE: When asked to produce a spreadsheet, you may instead implement
the model in Octave or another system. For full credit you must
translate the algorithm into a computer program and produce output
from several examples. Include your code.
Do the following exercise from the textbook Chapter 5.2, p.88:
Exercise 5.3.
Do the following exercises from the textbook Chapter 6.3, p.96:
Exercise 6.7.
Exercise 6.8. Generalize to N>2 and prove the result in a
model-independent manner from the no arbitrage axiom.
Exercise 6.9.