A probabilistic approach to price American digital call options on Vietnamese stock

Abstract

The probabilistic and numerical method for pricing American digital call options has been investigated signi cantly in the developed and emerging markets; however, only a few studies have been applied in the case of the Vietnamese market. Thus, the objective of my thesis is to study the probabilistic approach and binomial tree approach to derive the formula of American digital call options and present appropriately how to apply the method on Vietnamese stocks. To be more speci c, the MSN stock (Masan group) has been conducted for testing the normality, modeling under probabilistic, binomial tree method, with R codes given in detail. The relationship is graphically illustrated by the use of a R code implementation of the models. Keywords: American digital call options, Probabilistic approach, Binomial tree model, option pricing, Masan stock (MSN), MS Excel, R Language