Type tab
In the Type tab you select the option type and the method of calculation. These options only appear for the upgraded version as the basic version is limited to closed form options using the Black-Scholes formula.
The Type tab includes choices for American or European options and European barrier options.
With the upgrade you get access to Lattice (Binomial and Trinomial) and Monte Carlo methods. At $4.99, the cost is a fraction of the price for such capabilities on other platforms.
Lattice
The settings for Lattice methods allow you to choose whether to utilise “Binomial” or “Trinomial” methods and to set the number of lattice steps (up to 100). You can also choose “Single run” or “Dual run”.
A single run involves going through the lattice routine once. One of the problems with lattice techniques are that the results oscillate around the correct answer. The dual run setting reduces this oscillation by averaging the results of one run using the specified number of steps and a second run using the specified number of steps minus 1.
The setup displayed is for an American option calculated using 100 steps.
The Monte Carlo seetings are explaned on the Upgrade page.
