2000 character limit reached
Risk-Neutral Pricing of Random-Expiry Options Using Trinomial Trees (2508.17014v1)
Published 23 Aug 2025 in q-fin.PR and q-fin.CP
Abstract: Random-expiry options are nontraditional derivative contracts that may expire early based on a random event. We develop a methodology for pricing these options using a trinomial tree, where the middle path is interpreted as early expiry. We establish that this approach is free of arbitrage, derive its continuous-time limit, and show how it may be implemented numerically in an efficient manner.
Collections
Sign up for free to add this paper to one or more collections.
Paper Prompts
Sign up for free to create and run prompts on this paper using GPT-5.