Risk-Neutral Pricing of Random-Expiry Options Using Trinomial Trees
Risk-Neutral Pricing of Random-Expiry Options Using Trinomial Trees ArXiv ID: 2508.17014 “View on arXiv” Authors: Sebastien Bossu, Michael Grabchak Abstract Random-expiry options are nontraditional derivative contracts that may expire early based on a random event. We develop a methodology for pricing these options using a trinomial tree, where the middle path is interpreted as early expiry. We establish that this approach is free of arbitrage, derive its continuous-time limit, and show how it may be implemented numerically in an efficient manner. ...