Binomial: Difference between revisions
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imported>Doug Williamson (Align with Glossary and define 'binomial' on its own here, rather than 'binomial distribution'.) |
imported>Doug Williamson m (Add in-page categorisation.) |
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''Statistics''. | |||
Binomial models assume that there are only two possible outcomes, each time a trial is run. | Binomial models assume that there are only two possible outcomes, each time a trial is run. | ||
Revision as of 12:34, 5 August 2014
Statistics.
Binomial models assume that there are only two possible outcomes, each time a trial is run.
For example, a fixed percentage jump up or jump down in a market price per short time interval.
A binomial tree or binomial lattice can then be built up from a series of binomial outcomes, to model market prices over longer time periods.
Similar modelling can also be applied to non-financial variables.
