Numerical method for the valuation of financial options
In finance, the binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" (lattice based) model of the varying price over time of the underlying financial instrument, addressing cases where the closed-form Black–Scholes formula is wanting.
The binomial model was first proposed by William Sharpe in the 1978 edition of Investments (ISBN 013504605X),[1] and formalized by Cox, Ross and Rubinstein in 1979[2] and by Rendleman and Bartter in that same year.[3]
For binomial trees as applied to fixed income and interest rate derivatives see Lattice model (finance) § Interest rate derivatives.
^William F. Sharpe, Biographical, nobelprize.org
^Cox, J. C.; Ross, S. A.; Rubinstein, M. (1979). "Option pricing: A simplified approach". Journal of Financial Economics. 7 (3): 229. CiteSeerX 10.1.1.379.7582. doi:10.1016/0304-405X(79)90015-1.
^Richard J. Rendleman, Jr. and Brit J. Bartter. 1979. "Two-State Option Pricing". Journal of Finance 24: 1093-1110. doi:10.2307/2327237
and 19 Related for: Binomial options pricing model information
finance, the binomialoptionspricingmodel (BOPM) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time"...
syntactic device Binomial nomenclature, a Latin two-term name for a species, such as Sequoia sempervirens Binomialoptionspricingmodel, a numerical method...
binomialoptionspricingmodel or simply abbreviated as the quantum binomialmodel. Metaphorically speaking, Chen's quantum binomialoptionspricing model...
analytic models: the most basic of these are the Black–Scholes formula and the Black model. Lattice models (Trees): Binomialoptionspricingmodel; Trinomial...
computational model used in financial mathematics to priceoptions. It was developed by Phelim Boyle in 1986. It is an extension of the binomialoptionspricing model...
the school, including the Black–Scholes model, the random walk hypothesis, the binomialoptionspricingmodel, and the field of system dynamics. The faculty...
Rational pricing is the assumption in financial economics that asset prices – and hence asset pricingmodels – will reflect the arbitrage-free price of the...
statistics, econometrics, and signal processing, an autoregressive (AR) model is a representation of a type of random process; as such, it is used to...
first applied to optionpricing by Eduardo Schwartz in 1977.: 180 In general, finite difference methods are used to priceoptions by approximating the...
asset pricing refers to a formal treatment and development of two interrelated pricing principles, outlined below, together with the resultant models. There...
probability theory and statistics, the negative binomial distribution is a discrete probability distribution that models the number of failures in a sequence of...
management § Investment management for discussion. In pricing derivatives, the binomialoptionspricingmodel provides a discretized version of Black–Scholes...
particularly options, and was known for his contributions to both theory and practice, especially portfolio insurance and the binomialoptionspricingmodel (also...
relationships for options) Intrinsic value, Time value Moneyness Pricingmodels Black–Scholes model Black modelBinomialoptionsmodel Implied binomial tree Edgeworth...
equivalent volatility under the CEV model with the same β {\displaystyle \beta } is used for pricingoptions. A SABR model extension for negative interest...
at each node in a binomialoptionspricingmodel. The tree successfully produced option valuations consistent with all market prices across strikes and...
Roll–Geske–Whaley Black modelBinomialoptionsmodel Finite difference methods for optionpricing Garman–Kohlhagen model The Greeks Lattice model (finance) Margrabe's...
Reserve requirement or cash reserve ratio Binomialoptionspricingmodel or Cox Ross Rubinstein optionpricingmodel Clinchfield Railroad Cat Righting Reflex...
Global Information