Numerical Approaches of Pricing European Options in the Cox-Ross-Rubinstein Models

The Cox-Ross-Rubinstein (CRR) market model is one of the simplest and easiest ways to analyze option pricing model. CRR has been employed evaluate a European Option Pricing (call options) without complex elements, including dividends, stocks, stock indexes. Instead, it considers only continuous dividend yield, futures, currency options. simple but strong enough describe general economic intuition behind its principal techniques. Also, gives us basic ideas on how develop financial products based current deviations volatilities. paper investigates using numerical approaches with python code. It provides practical event mathematical demonstrate application in market. First, example figure out concept Only two-period binomial introductory definitions call options makes understand more easily quickly. Next, we used actual data Tesla fluctuations from Nasdaq website (See section 3). We developed code make easier figures, tables graphs. allows visualize simplify output data. analyzes probability stock’s price increasing or decreasing. Then, estimate all possible cases for prices investigate put pricing. was pricing, improved get information provide detailed results codes are provided 3 paper. As result, believe fundamental formula, can suggest new direction evaluating investigating value stocks. expect extend Black Scholes model, number periods.