The OPTIONB.lng Model

Binomial Options Pricing

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In this model, we assume that a stock can either go up in value from one period to the next with probability PUP, or down with probability (1-PUP). Under this assumption, the log of a stock's return will be binomially distributed. In addition, the symmetric probabilities allow us to build a dynamic programming recursion to determin the options value.

Keywords:

Probabilities | Uncertainty | Option Pricing | Binomial Option Pricing | Derivatives | Break Even Point | Sales | Accounting | Banking | Financial | Portfolio | Black & Scholes | Options |