A stock operator's thoughts and ideas about market principles
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Nov/05/2008
Binomial Tree Generator
If you happen to be a finance student or teacher, the calculator below may come in handy. It draws the prices of calls and puts for up to five periods, and solves both for the European and American type. Asian and other types will also be included if it turns out popular.
I do not know why such trees are so much used in finance classes, except maybe that they are easy to correct (but very time consuming to create - until now) and test some very basic understanding.
Binomial Stock and Option Tree Generator
for European and American Call and Put Option Prices.
Notice that the probability of moving up from one node to the next follows this fomula
and any node (prior to the rightmost column) equals the expected value of the next step discounted by this factor
These outputs will be calculated:
the Risk Neutral Probabilities,
a Stock Price Tree,
a European Call Option Tree,
a European Put Option Tree,
an American Call Option Tree, and
an American Put Option Tree
- with values in every node.
Copyright 2008 © Jan-Petter Janssen
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