Binomial Tree

Initializing live version
Download to Desktop

Requires a Wolfram Notebook System

Interact on desktop, mobile and cloud with the free Wolfram Player or other Wolfram Language products.

Binomial trees are often used in the pricing of financial derivatives. The price of the asset underlying the derivative (for instance, the stock price in the case of a stock option) is assumed to follow an evolution such that, in each period in time, it increases by a fixed proportion or decreases by another fixed proportion. These fixed proportions are labeled above as the "up factor" and the "down factor". The tree traces out all possible price histories of the underlying asset.

Contributed by: Fiona Maclachlan (March 2011)
Open content licensed under CC BY-NC-SA




Feedback (field required)
Email (field required) Name
Occupation Organization
Note: Your message & contact information may be shared with the author of any specific Demonstration for which you give feedback.