Binomial Process

The division of a time period into several increments, during each of which one of two things may occur. During the next increment, one of two other things may happen. The binomial process is used in some decision making processes; it also provides the mathematical basis for the binomial model for pricing option contracts.

References in periodicals archive

This model assumes that the price of the underlying asset can be approximated by a binomial process. At each time interval, the price of the underlying asset moves up to (u) or down (d).

Modelling "Bai Al Arboun" using binomial model

Following the binomial process, the stock can take three possible values after two periods 2[DELTA]t : [u.sup.2] [S.sub.0], ud[S.sub.0], [d.sup.2][S.sub.0]; at the end of three periods 3[DELTA]t, the stock has four possible values: [u.sup.3][S.sub.0], [u.sup.2]d[S.sub.0], [ud.sup.2][S.sub.0], [d.sup.3][S.sub.0].

Pricing arithmetic Asian options under the CEV process/Valorizacion de la opcion Asiatica aritmetica bajo el proceso de variacion elastica constante (CEV process)

Subrahmanyam, 1984, "The Valuation of Options When Asset Returns Are Generated by a Binomial Process", Journal of Finance, 39:1525-1539

11020000 Binomial and multinomial models

The model assumes that the price of the underlying stock evolves according to a binomial process and that exercise decisions are made so as to maximize the expected utility of the option holder's terminal wealth.

Yes, employee stock options can be valued: recent history can provide clues for valuing employee stock options (ESOs). In fact, some experts say they can be modeled much like mortgage securities. (Stock Options)

The negative binomial process, on the other hand, seems appropriate for state or national assessment that involves more than one test grader.

Stochastic models of quality control on test misgrading

Ramaswamy, "Simple binomial processes as diffusion approximations in financial models," Review of Financial Studies, vol.

First Passage Time of a Markov Chain That Converges to Bessel Process

"Simple Binomial Processes as Diffusion Approximation in Financial Models." Review: of Financial Studies 3 (3):393-430.

Optimal forest rotation when stumpage prices follow a diffusion process