Binomial Model

The binomial model is a mathematical way to predict how the value of an investment, like a stock, might change over time with two possible outcomes: it either goes up or down. It divides the period into small steps, calculating the chances and potential sizes of gains or losses at each step. This helps investors understand the possible future prices and make informed decisions. It's widely used in finance to value options and manage risk by simulating different scenarios of price movements.