Mastering Python for Finance - Second Edition

A class for the LR binomial tree option pricing model

The Python implementation of the LR tree is given in the following BinomialLROption class. Similar to the BinomialCRROption class, we simply inherit the BinomialTreeOption class and override the variables in the setup_parameters method with those of the LR tree model:

In [ ]:    import math    """     Price an option by the Leisen-Reimer tree    """    class BinomialLROption(BinomialTreeOption):        def setup_parameters(self):            odd_N = self.N if (self.N%2 == 0) else (self.N+1)            d1 = (math.log(self.S0/self.K) +                  ((self.r-self.div) +                   (self.sigma**2)/2.)*self.T)/\                (self.sigma*math.sqrt(self.T))            d2 = (math.log(self.S0/self.K) +                  ((self.r-self.div) -                   (self.sigma**2)/2.)*self.T)/\ (self.sigma * math.sqrt(self.T)) ...