From ACT Wiki
Jump to navigationJump to search


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.

See also