Abstract:We derive error estimates for multinomial approximations of American options in a multidimensional jump-diffusion Merton's model. We assume that the payoffs are Markovian and satisfy Lipschitz type conditions. Error estimates for such type of approximations were not obtained before. Our main tool is the strong approximations theorems for i.i.d. random vectors which were obtained in [14]. For the multidimensional Black-Scholes model our results can be extended also to a general path dependent payoffs which sati… Show more
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