Chemist_MZ 发表于 2012-1-8 09:10 
Binormil tree is also useful when applied to path dependent option. e.g. Asian option, barrier o ...
So you mean you don't need to consider every path when you price Asia options, barrier options and reverse convertible?
You want be careful when you say binomial tree can pricing so many path dependent option.
......You can use it to price different options does not mean it is good in terms of 1. accuracy 2. time consuming 3. generic.
Path dependent option requires large quantity of paths in order to get the pricing correct, which is the limitation of binomial tree.
In addition, if one to take volatility smile into account, it is very limited. Perhaps you can use Derman's local vol model back 13 years ago...... Not sure if Goldman ever used it after Dupire model......
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