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  2. Binomial options pricing model - Wikipedia

    en.wikipedia.org/wiki/Binomial_options_pricing_model

    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.

  3. Lattice model (finance) - Wikipedia

    en.wikipedia.org/wiki/Lattice_model_(finance)

    The simplest lattice model is the binomial options pricing model; [7] the standard ("canonical" [8]) method is that proposed by Cox, Ross and Rubinstein (CRR) in 1979; see diagram for formulae. Over 20 other methods have been developed, [ 9 ] with each "derived under a variety of assumptions" as regards the development of the underlying's price ...

  4. Finite difference methods for option pricing - Wikipedia

    en.wikipedia.org/wiki/Finite_difference_methods...

    The approach arises since the evolution of the option value can be modelled via a partial differential equation (PDE), as a function of (at least) time and price of underlying; see for example the Black–Scholes PDE. Once in this form, a finite difference model can be derived, and the valuation obtained.

  5. Outline of finance - Wikipedia

    en.wikipedia.org/wiki/Outline_of_finance

    Black–Scholes formula. Approximations for American options Barone-Adesi and Whaley; Bjerksund and Stensland; Black's approximation; Optimal stopping; Roll–Geske–Whaley; Black model; Binomial options model; Finite difference methods for option pricing; Garman–Kohlhagen model; The Greeks; Lattice model (finance) Margrabe's formula; Monte ...

  6. Valuation of options - Wikipedia

    en.wikipedia.org/wiki/Valuation_of_options

    The valuation itself combines (1) a model of the behavior of the underlying price with (2) a mathematical method which returns the premium as a function of the assumed behavior. The models in (1) range from the (prototypical) Black–Scholes model for equities, to the Heath–Jarrow–Morton framework for interest rates, to the Heston model ...

  7. How implied volatility works with options trading

    www.aol.com/finance/implied-volatility-works...

    To use these models, traders input information such as the stock price, strike price, time to expiration, interest rate and volatility to calculate an option’s theoretical price. To find implied ...

  8. Option (finance) - Wikipedia

    en.wikipedia.org/wiki/Option_(finance)

    The model starts with a binomial tree of discrete future possible underlying stock prices. By constructing a riskless portfolio of an option and stock (as in the Black–Scholes model) a simple formula can be used to find the option price at each node in the tree.

  9. Talk:Binomial options pricing model - Wikipedia

    en.wikipedia.org/wiki/Talk:Binomial_options...

    It is an uninteresting result that has no significance, since the limit of the binomial model is the Black-Scholes formula and there are no computational complexity problems at all. This reference to Georgiadis does not deserve to be there and will distract readers trying to learn something about the binomial model.