Binomial model

A model for pricing tradable call options. This model option values from a set of recursive equations.

The binomial model is more versatile than the Black-Scholes model. This versatility facilitates incorporation of early exercise and additional features of stock options into option valuation.


John C. Cox, Stephen A. Ross, and Mark Rubinstein, 1979, Option Pricing: A Simplified Approach, Journal of Financial Economics 7, 229-263


Richard J. Rendleman and Brit J. Bartter, 1979, Two-state option pricing. Journal of Finance 34, 1093-1110.