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Originally published: 20/06/2016 09:03
Publication number: ELQ-96236-1
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Black-Scholes converted for Binomial Tree

Converts the standard deviation input in the Black-Scholes model to up and down movements in the binomial tree.

by Prof. Aswath Damodaran
Professor at NYU Stern School of BusinessFollow 951

with NYU Stern School of Business
An Education in PossibleFollow 46

31 reviews3,872 views|Start the discussion!|Bookmark download for free

financeoption pricingstandard deviationblack-scholesbinomial treeupdown

Description
This model enables you to convert an annualized standard deviation in the Black-Scholes model to get up and down movements in the binomial tree.

Needed inputs:
- Annualized Standard deviation
- Riskless rate
- Dividend yield
- Number of periods each year

- Value of option today

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)

This Best Practice includes
1 Excel Model File

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