Download the binomial.cpp file,

The function binomial calls itself repeatedly and returns the result to the calling funtion i. For doing the same operation number of times, we use do-while loop in our program code. Obviously, you must know how this function performs the calculation recursively.

The function returns the result after calculating as follows. You can give input until you want to find the coefficients. The ability to determine an option's maximum value at any future point in time makes the binomial model the model of choice for pricing American and Bermudan options. While computationally slower than the black-scholes model, the binomial model is more accurate. This is due to the black-scholes' reliance on the cumulative distribution function of a normal distribution, which can only be numerically approximated.

The latter executable prints a side-by-side comparison of the black-scholes price and the binomial price as the resolution on the binomial model is increased the resolution represents the number of discrete time periods. As the resolution of the binomial model increases, the difference between the prices of the two models decreases.

The latter relationship holds until between resolutions of 1, and 10,, where the difference in prices increases due to the cdf approximation function used in the black-scholes model. The approximation is only accurate to about four decimal places. The OCaml folder contains implementations of both the binomial model and the black-scholes model. The binomial model uses linked lists to enumerate each of the possible states of the underlying asset in a discrete time period.

A modified mapping function is then used to take the expectation of each adjacent state, which in turn is then used to calculate the prior state. Also included in the OCaml section is a command line app that prompts the user for each of the required details about the options contract. It then prints the price of the option to stdout. Active 5 months ago. Viewed 19k times.

Bombertoman Bombertoman 21 1 1 gold badge 1 1 silver badge 3 3 bronze badges. Sorry for my ignorance, but how can I know? Add a comment. Active Oldest Votes. Mariusz Mariusz 1 1 silver badge 5 5 bronze badges.

Basile Starynkevitch Basile Starynkevitch k 16 16 gold badges silver badges bronze badges. Ok I downloaded the libcurl library I looked up for it but I couldn't find it I'm really a newbie, so I'm sorry if my questions look obvious But you need to understand HTTP before.

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