Trinomial tree

<p>The trinomial tree is a <a href="/facts/Lattice_model_(finance)/sotPp1xA">lattice-based</a> <a href="/facts/Computational_model/dq1CR6us">computational model</a> used in <a href="/facts/Financial_mathematics/P9otEltQ">financial mathematics</a> to price <a href="/facts/Option_(finance)/5gJFXV3X">options</a>. It was developed by <a href="/facts/Phelim_Boyle/pTamzmM1">Phelim Boyle</a> in 1986. It is an extension of the <a href="/facts/Binomial_options_pricing_model/S8Jt6ENH">binomial options pricing model</a>, and is conceptually similar. It can also be shown that the approach is equivalent to the <a href="/facts/Finite_difference_method/EoG81Qn9">explicit</a> <a href="/facts/Finite_difference_methods_for_option_pricing/kLGugeug">finite difference method for option pricing</a>. For <a href="/facts/Fixed_income/om1XWfKb">fixed income</a> and <a href="/facts/Interest_rate_derivative/N4bwae4Y">interest rate derivatives</a> see <a href="/facts/Lattice_model_(finance)/sotPp1xA">Lattice model (finance)#Interest rate derivatives</a>.
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Trinomial tree open-in-new

Trinomial tree