- Function File:
*[*`AssetPrice`,`OptionValue`] =**binprice***(*`Price`,`Strike`,`Rate`,`Time`,`Increment`,`Volatility`,`OptType`) - Function File:
*[*`AssetPrice`,`OptionValue`] =**binprice***(*`Price`,`Strike`,`Rate`,`Time`,`Increment`,`Volatility`,`OptType`,`DividendRate`) - Function File:
*[*`AssetPrice`,`OptionValue`] =**binprice***(*`Price`,`Strike`,`Rate`,`Time`,`Increment`,`Volatility`,`OptType`,`DividendRate`,`Dividend`,`ExDiv`) Compute American call and put option prices using a binomial tree.

- Variable:
`Price`The current price of the underlying asset. - Variable:
`Strike`The strike price the option is written on. - Variable:
`Rate`The risk-free interest rate. - Variable:
`Time`The time-to-expiry. - Variable:
`Increment`Time increment.`Increment`is rounded to ensure that`Time`/`Increment`is an integer. - Variable:
`Volatility`The volatility of the underlying asset. - Variable:
`OptType`Option type. 1 = call option, 0 = put option. - Variable:
`DividendRate`(Optional, default = 0) Annualized, continuously compounded rate of dividends of the underlying asset. - Variable:
`Dividend`(Optional, default = 0) The dividend payment at an ex-dividend date as specified by`ExDiv`. - Variable:
`ExDiv`(Optional, default = 0) A vector used to determine the ex-dividend dates. For each j,`ExDiv`(j) *`Increment`is the corresponding dividend date.

Computes the American call and put option prices using the Cox-Ross-Rubinstein binomial tree.

Discrete dividends (i.e.

`Dividend`and`ExDiv`) have not yet been implemented.Binomial trees are a particular explicit finite difference method for solving the Black-Scholes equation (see M. Rubinstein. On the relation between binomial and trinomial option pricing models. Journal of Derivatives, 8(2):47-50, 2000), and exhibit linear convergence along with the usual strict stability requirements of an explicit method. The serious practitioner should consider using a more sophisticated method, and use binomial trees only for explanatory or heuristic purposes.

**See also:**blkprice, blsprice.- Variable:

Package: financial