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Binomial Option Pricing Model |
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Binomial Option Pricing Model A simple model used to price options that reduces possibilities of price changes, removes the possibility for arbitrage, assumes a perfectly efficient market, and shortens the duration of the option. Notes: The binomial model takes a risk-neutral approach to valuation. It assumes that underlying security prices can only either increase or decrease with time until the option expires worthless. Binomial option pricing model An option pricing model in which the underlying asset can assume one of only two possible, discrete values in the next time period for each value that it can take on in the preceding time period. |
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Implementing this method requires the more complicated binomial option pricing model. The market value of Bear Creek includes the estimated value of the warrants acquired as part of the private placement, which have been valued using a binomial option pricing model. The Fund uses a binomial option pricing model to estimate the fair values. |
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