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Arbitrage Theory in Continuous Time$
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Arbitrage Theory in Continuous Time

Tomas Björk

Print publication date: 2004

Print ISBN-13: 9780199271269

Published to Oxford Scholarship Online: October 2005

DOI: 10.1093/0199271267.001.0001

The Binomial Model

Chapter:
(p. 5 ) 2 The Binomial Model
Source:
Arbitrage Theory in Continuous Time
Author(s):

Tomas Björk (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/0199271267.003.0002

This chapter discusses the binomial model — the simplest nontrivial model of a financial market. It begins with the period version of the model, then the model is extended to an arbitrary number of periods. Practice exercises are included.

Keywords:   binomial model, bond, price, portfolio, arbitrage, contingent claim

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