Mastering Python for Finance - Second Edition

A class for the CRR binomial lattice option pricing model

Let's convert the binomial tree pricing into a lattice by CRR. We can inherit from the BinomialCRROption class (which in turn inherits the BinomialTreeOption class) and create a new class named BinomialCRRLattice, as follows:

In [ ]:    import numpy as np    class BinomialCRRLattice(BinomialCRROption):        def setup_parameters(self):            super(BinomialCRRLattice, self).setup_parameters()            self.M = 2*self.N + 1        def init_stock_price_tree(self):            self.STs = np.zeros(self.M)            self.STs[0] = self.S0 * self.u**self.N            for i in range(self.M)[1:]:                self.STs[i] = self.STs[i-1]*self.d        def init_payoffs_tree(self):            odd_nodes = self.STs[::2]  # Take odd nodes only            if self.is_call: return np.maximum(0, odd_nodes-self.K) ...