The binomial model uses a "discretetime framework" to trace the evolution of the option's key underlying variable via a binomial lattice (tree); the given evolution then forms the basis for the option valuation. In general, the value of the option at any node in the lattice is determined  given the option style  using the risk neutrality[?] assumption for the price of the underlying at that node, and the value of the option at the two later nodes (or the exercise value at a final node). The procees is iterative, starting at each final node, and then working backwards through the tree to t = 0, where the calculated value is the value of the option in question.
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