Binomial Option Pricing Model with Excel VBA (for European Options)

[@skengzy0684]

Thank you, best one I've seen hands down

[@FabianMoa]

Wow, thanks!

[@hansvonwurscht3230]

Great video, it all worked out for me!

[@guillaumerondio9294]

Thank you for your video ! I have been, implementing your code and I seem to have noticed that it can encounter a problem for a large number of periods. I am using the example of a Call option with the underlying asset = 100, the strike = 110, the Rfr = 5%, the volatility = 30% and the maturity is 1 year. For a reason I cannot seem to find when I go anywhere higher than 1030 periods there is a type mismatch error. I am using your code to find out the number of periods needed to approach the BS price with a required accuracy. Thank your for your video !

[@FabianMoa]

Hi! I have not tried up to more than 1,030 periods yet but I will give it a try one day and see the result.

[@guillaumerondio9294]

@@FabianMoa Thank you for your response, have a lovely day !

[@zaynahchummun668]

@@guillaumerondio9294 Yes I have tried as well and beyond 1030, it is an error, why is that so?

[@IntegralDeLinha]

Great didactics! Thank you!

[@robertog7362]

I made a very similar code but now i want to do it for an american option, how to code it?

[@Wookie_Goldberg]

What would be really useful would be to take the market price of the options as the starting point, and then rather than guessing at the vol, we backed out the implied up move based on the market price of the option, the risk-neutral probabilities, and an assumtipn for the down-move

[@FabianMoa]

Note taken 👍

[@craigbailey2648]

I’m new to the BOPM and understand the setup/use for European options. How would you use or adjust your setup for American options?

[@FabianMoa]

The adjustment you need to make is: at every node, the option value = MAX(option payoff, discounted weighted option payoff)

[@a.w.848]

@@FabianMoa like this "Case "Call": BinomAmerica = BinomAmerica + Application.Combin(n, i) * p ^ i * (1 - p) ^ (n - i) * Application.Max( S - K, S * u ^ i * d ^ (n - i) - K) Case "Put": BinomAmerica = BinomAmerica + Application.Combin(n, i) * p ^ i * (1 - p) ^ (n - i) * Application.Max( K - S, K - S * u ^ i * d ^ (n - i))" ? I think its right

[@wailnadir3831]

thank you

[@Mengadmire]

amzing