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OptimisedTrinomialLatticeProbs

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Function Description

Returns optimised transition probabilities as an output array  given lattice levels  which an underlying at the current lattice node can move to, given that we want the sum of the probabilities to add to SumWts (will almost always be 1, as otherwise the  are not actually probabilities), the weighted mean of the underlying at the end of this period to be WtdMean and the one-period volatility of the underlying to be WtdStd.

 

We thus want:

 

 

Thus

 

 

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Output type / Parameter details

Output type: Double()
Parameter NameVariable TypeDescription
LatticeLevelsDouble()Lattice levels (a 3 element array) to which underlying can move
SumWtsDoubleSum of weights (usually 1)
WtdMeanDoubleWeighted mean
WtdStdDoubleWeighted standard deviation

Links to:

-          Interactively run function

-          Interactive instructions

-          Example calculation

-          Output type / Parameter details

-          Illustrative spreadsheet

-          Other Derivative pricing functions

-          Computation units used


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