xuruilong100 发表于 2013-6-5 11:19 
可以具体解释一下吗？
如果采用新的比例，树的结构会变得不好，在常数波动率下，树的许多节点是重合的。 ...
Ha, maybe I express it too simple.
Yes, in that case, we have to reconstruct the binomial tree which is called the time varying volatility binomial tree. It imposes some restrictions so that to guarantee the tree nodes recombine together and meanwhile, of course, hold the no-arbitrage condition. I have not find some good materials online. But the author of this post gave me some photos he took from the text book (attachment). I think that may help you.
best,
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