Performance Analysis of Trinomial Tree Model for European and American Option Pricing

Solima Khanam; Md Mahfuzur Rahman

doi:10.3329/jnujsci.v11i2.84234

Performance Analysis of Trinomial Tree Model for European and American Option Pricing

Authors

Solima Khanam Department of Mathematics, Jagannath University, Dhaka-1100, Bangladesh
Md Mahfuzur Rahman Department of Mathematics, Jagannath University, Dhaka-1100, Bangladesh

DOI:

https://doi.org/10.3329/jnujsci.v11i2.84234

Keywords:

Binominal model, Trinomial model, European options, American options

Abstract

In financial market, option pricing plays a vital role in the stock market and having significant outlook in the economic development of a nation. In business and stock market, different financial models are developed for computing options for stocks or bonds. In this work, we focused on basic concepts of trinomial tree model, derivation and algorithm and application of it. Here, we apply the trinomial model for American and European option pricing. Basically, we applied the techniques to obtain American and European option prices to incorporate an investor’s view of the future behavior of the stock market related to European and American options. Finally, we showed some basic difference between American and European option applying trinomial model.

Jagannath University Journal of Science, Volume 11, Number 2, Dec. 2024, pp. 45−57

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Published

2025-09-17

How to Cite

Khanam, S., & Rahman, M. M. (2025). Performance Analysis of Trinomial Tree Model for European and American Option Pricing. Jagannath University Journal of Science, 11(2), 45−57. https://doi.org/10.3329/jnujsci.v11i2.84234