Gosper's Algorithm Meets Wall Street Formulas 124
peter.hill.1980 writes "Wall Street's money making formulas need to be as explicit as possible for efficiency purposes. An old, existing and famous formula — binomial options pricing formula — has now been scrutinized for theoretical optimality in a forthcoming paper by Evangelos Georgiadis of MIT using Gosper's Algorithm, proving that no general explicit or closed form expression exists for pricing."
European not American option pricing (Score:3, Informative)
It seems, after reading through the paper (to the extent my non-MIT mind understood things) that this is based upon a pricing model of European options [slashdot.org]. European options can only be exercise on the expiry date, American options can be exercised any time before that date.
Re:Hurh? (Score:4, Informative)
I'm an analyst for a large financial firm, and this is actually old news for us soul-sellers. There is no good options pricing model; they all have problems.
These articles should help clear things up:
http://en.wikipedia.org/wiki/Binomial_options_pricing_model [wikipedia.org]
http://en.wikipedia.org/wiki/Black-Scholes [wikipedia.org]
http://en.wikipedia.org/wiki/Monte_Carlo_option_model [wikipedia.org]
Re:Hurh? (Score:5, Informative)
To the Wikipedia-mobile, Geek Wonder!
The actual Deal, If anyone cares (Score:4, Informative)