Binomial model

英文Binomial model

中文 (征集中)


(1)Any model that incorporates a binomial tree, also called a binomial lattice. (2) Describes the evolution of a random variable over a series of time steps, assigning given probabilities to a rise or fall in the variable. After the initial rise or fall, the next two branches will each have two possible outcomes and so the process will continue, building a ‘tree over time. The process is usually specified such that an upward movement followed by a downward movement results in the same price, so that the branches recombine. Binomial trees are of interest because they can be used to deal with American-style features: the early exercise condition can be tested at each point in the tree



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