DER 04.2 Option valuation: Binomial method

Some options, because of their contract design, do not have analytical valuation formulas (e.g., American-style options). Nonetheless, they can be valued accurately using approximations. The most popular among these is the binomial method.

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• Required reading

  • Whaley, 2006, Ch. 9, Valuing options numerically (pp. 303-319)

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• Lecture notes

  • Slides

  • Supporting files​

    • Binomial method.xlsx

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