# Questions tagged [binomial-tree]

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### Fixed income modeling

I am currently working on my research paper and trying to explain a two-dimensional variable: volume and instrument of corporate debt financing. Independent variables that I believe must be included ...
306 views

### How to handle coupon payments when pricing a bond with an embedded option?

I'm using a binomial tree to price a bond that has an embedded call or put option. On every node that has a coupon payment, do you include the coupon payment then max/min out the value, or do you max/...
1k views

### Demonstration of Ito's correction term/lemma in binomial tree

I am preparing an undergraduate QuantFinance lecture. I want to demonstrate the ideas of Ito's correction term and Ito's lemma in the most accessible manner. My idea is to take the "working horse" of ...
661 views

### 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 ...
514 views

103 views

### Difference between tree and lattice approach

Is there any difference between the tree and lattice approach for valuing derivatives? I was under the impression that both are the same.
259 views

### Minimum Variance Hedge Ratio in Binomial Framework

In order to find the minimum variance hedge ratio when holding a portfolio of vanilla call options and hedging with stock, you can do an OLS regression. In a binomial model framework, given ...
154 views

### Is there a more efficient data structure to implement binomial trees than 2d array?

I'm just curious what is the "industry standard" for implementing a binomial tree (if "standards" exist in this case). For simplicity, let's just talk about the simplest trees with recombining nodes. ...
688 views

### Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?

I have discussion with my colleague on why a general assumption $$ud=1$$ in binomial tree option pricing model would be necessary? I take it a simplification of the problem, otherwise, there will be ...
167 views

### 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 + ...