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Binomial Option Pricing Model


What does Binomial Option Pricing Model mean?

Binomial option pricing is a method for calculating fair price of call and put options on commodities and commodity futures.  It is based on the assumption that the price of the underlying asset follows a binomial distribution.  

Futures Knowledge Explains Binomial Option Pricing Model

Binomial Option Pricing Model is used to price an option where the underlying asset price in each period can move only up or down by a specified amount. It is a simple pricing model but has some limitations. It is more appropriate for a short duration and for an efficient market.



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