15

The Binomial Options Pricing Model

LEARNING OBJECTIVES

After completing this chapter, you will be able to answer the following questions:

  • What is meant by the binomial model for options pricing?

  • What is meant by no-arbitrage options pricing?

  • How to calculate the price of a call option using single-period, two-period, and multi-period binomial models?

  • How to calculate the price of a put option using single-period, two-period, and multi-period binomial models?

  • How to calculate the price of a call and a put option on stocks that pay dividends using binomial models?

  • How to calculate the price of an American call and an American put option using binomial models?

BOX 15.1 Binomial Options Pricing Models Used to Value Employee Stock Option ...

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