Binomial Option Pricing Model: Three Approaches
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1. Context
In this video from FRM Part 1 curriculum, we take a look at the Binomial option pricing model using a simple solved example. This example helps us confirm the equivalence of three approaches: Perfect Hedge approach, Replicating portfolio approach and Risk Neutral valuation approach. This video is included in the FRM Part 1 preparation course. The details of the reading in which this topic appears are given below:
| Area | Valuation and Risk Models |
| Reading | Binomial Trees |
| Reference | Chapter 14. Binomial Trees In GARP Official Books (FRM Part I, VRM section) (GARP, 2020). |