# Questions tagged [binomial-tree]

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### Arbitrage free implies complete market in general binomial model?

Edit: Can complete hold even if $d < u \le 1+R$ or $1+R \le d < u$ ? In Tomas Björk's Arbitrage Theory in Continuous Time (or here), $\exists$ this proposition It seems that to show that the ...
• 921
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### Risk neutral probability for stock with continuous dividend

Setting: binomial tree with one step over time $\Delta t$. I'm trying to derive the risk neutral probability for a stock which pays a continuous dividend, say $\delta$. i.e. probability $p$ such that ...
• 170
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### Two-period binomial model with dividends

Consider a two-period binomial model for a risky asset with each period equal to a year and take $S_0 = 1$, $u = 1.15$ and $l = 0.95$. The interest rate is $R = .05$. a.) If the asset pays 10% of its ...
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### How to use binomial tree for portfolio of equity products

How can I use a binomial tree to price a European option that's based on a portfolio of equity products? I have volatility and correlation matrix of all underlying products? Looking for a formula ...
• 467
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I'm having trouble with the Ho-Lee model for short rates and differentiating between how to find the values for the free parameter λ versus using the model to predict future rates. The Ho-Lee model ...
• 1,549
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### Approximation of CRR as Black Scholes PDE

I have a formula for intermediate european option price calculated at, say, m-th possible tree value. $S_n^{(m)}$ is a price at node after going up $n$ times and down $n - m$ times \$V(S_n^{(m)}, t + ...
• 273
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### Binomial Model Implementation Trouble - American and European options come out equal

I'm Trying to implement the binomial option price model in python and get reasonable performance by using memoization. I checked the output against a black and scholes model and for European options ...
For a binomial tree, everywhere in Hull and other literature, we have found the formulas for $$u = \exp(\sigma \sqrt{h})$$ but for binomial trees based on forward prices, we get a different formula ...