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Finance Dictionary and Glossary of Investment Terms
Binomial option pricing model
Definition 1.
An option pricing model in which the underlying asset can assume one of only two possible, discrete values in the next time period for each value that it can take on in the preceding time period.
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Definition 2.
A simple model used to price options by which possibilities of price changes are reduced, the possibility for arbitrage is removed, a perfectly efficient markets is assumed, and the duration of the option is shortened.
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