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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.
In section Computer Implementations of this article there is a list of spreadsheets: Binomial Options Pricing Spreadsheet, Peter Ekman; American Options - Binomial Method, global-derivatives.com; European Options - Binomial Method, global-derivatives.com; 1st: page doesn't work (some PHP Zend Optimizer problem).
Finite difference methods were first applied to option pricing by Eduardo Schwartz in 1977. [2] [3]: 180 In general, finite difference methods are used to price options by approximating the (continuous-time) differential equation that describes how an option price evolves over time by a set of (discrete-time) difference equations.
The trinomial tree is a lattice-based computational model used in financial mathematics to price options. It was developed by Phelim Boyle in 1986. It is an extension of the binomial options pricing model, and is conceptually similar. It can also be shown that the approach is equivalent to the explicit finite difference method for option ...
Barrier option; Basket option; Bear spread; Binary option; Binomial options pricing model; Bjerksund and Stensland; Black model; Black–Derman–Toy model; Black–Scholes model; Black's approximation; Bond option; Boston option; Box spread; Bull spread; Butterfly (options)
Whether you use Microsoft Office Excel, Google Sheets or Apple Numbers, there’s a free spreadsheet for you. These budgeting templates will give you a head start from simple monthly and yearly ...
In finance, a price (premium) is paid or received for purchasing or selling options.This article discusses the calculation of this premium in general. For further detail, see: Mathematical finance § Derivatives pricing: the Q world for discussion of the mathematics; Financial engineering for the implementation; as well as Financial modeling § Quantitative finance generally.
In financial mathematics, the Ho-Lee model is a short-rate model widely used in the pricing of bond options, swaptions and other interest rate derivatives, and in modeling future interest rates. [1]: 381 It was developed in 1986 by Thomas Ho [2] and Sang Bin Lee. [3] Under this model, the short rate follows a normal process: