Binomial Option Pricing: With Examples

[@WhisperingPages-rs4kw]

you made it so easy I can't believe that put 3 hours in this concept and you explain it this concept in 10 min thank you so much

[@TheExceptionalState]

Super clear! Thank you. My guess (as a teacher) is that you are still close enough in time to remembering how difficult it was initially so that you could describe it without over-complicating it. Well done :)

[@renaldiprima1291]

I don't usually comment on KZbin. But your explanation is great. Keep up the good work!

[@financemark]

Thanks so much for your feedback! Happy the video helped :)

[@kentvandervelden]

Prof. Mark, this is fantastic! Please consider doing more of these lecture-style videos, which are useful and evergreen. Especially if your main audience if the population of retail investors without formal finance training. Like health, finance is so poorly taught to the masses, despite the subject's huge importance to success of the individual. I suspect you've seen the slick videos that sway people to spend large sums on options courses promising guaranteed returns. Just feel there's a lot you could to education people so they can protect themselves.

[@financemark]

Thanks for the sugestion. There are few reasons I don't do tutorials any more: (1) the viewer who would watch my current videos would not necessarily watch a tutorial on something finance related, so it would create issues with channel growth. I deleted a few videos because of this, actually. (2) Most of my tutorials have very low views, even for my channel, which makes them a not brilliant use of time. (3) I would end up disrupting myself. In essence, I would undermine the ability to create courses etc myself. (4) I found that tutorials are great for search traffic but bad for channel growth (i.e., people will view a tutorial for a specific thing, and that's it)

[@financemark]

As an addition: I think to do tutorials (etc), I'd need to do that on a different channel at this stage. Otherwise, I think KZbin wouldn't know what my channel is about, from what I can gather . But, I might put a few things on a new / different channel

[@giannapunzalan9814]

YOU ARE MY HERO!!! Thank you soooo much for this! I'm working on a take-home midterm and had NO IDEA how to tackle the pricing for the put option because my prof didn't even go over it in his online lectures o_O You should replace my professor, I'm not even kidding haha Thanks again!!!!

[@financemark]

Thanks so much for your feedback! Glad the video was helpful :)

[@emreyetim2547]

What is the 1.1 on 6:30 4th step can you tell me please ?

[@ankitpingale7407]

Best explanation I have come across...

[@financemark]

Glad it was helpful!

[@venkatsandra]

Great explanation! Complexity untangled. No nonsense. Also post a video on Monte Carlo simulation model.

[@financemark]

Thanks a lot, you're too kind :) Also thanks for the suggestion!

[@shivasisdash7343]

Awesome 👍 now I am ready for exam.thanks...

[@joaoviniciusalvesprado7423]

Thanks from Brazil, bro!

[@nnnyin6967]

Thanks for the video you made. How come 6:51 we are using 1/3stock price minus the option call price but not plus that, as my understanding, when we short-call, we are taking profit from selling the option isn’t it?

[@dominiqueceramella48]

Your video is great! This really helped me to see/understad the difference between the call and put calculation. Thanks :-)

[@seankimkim]

how did you determine the hedge portfolio with just the hedge ratio? ie, how did you know to short a call and buy a stock with the hedge ratio of 1/3?

[@kongzilla2897]

I didn't understand from 5:00 .. What actually is that upstate payoff? and why is that 10 subtracted?

[@wolfgangi]

What is the difference between what you've gone through in the video compare to the binomial tree valuation method?

[@ion5964]

Really good video. Thanks!

[@financemark]

Thanks so much!

[@abirkar4496]

Beautiful Explanation !

[@parmdeeppuri2981]

Mate - very good explanation.

[@financemark]

Thanks so much - glad it was helpful!

[@AbrahamSalazar210]

Excellent explanation!

[@financemark]

Thanks so much

[@meiqiyang1971]

you make my day. it is so so so so clear and easy to understand.

[@张大大-r1o]

Thank you sir! This helped me so much

[@financemark]

Excellent! Glad it was helpful :)

[@hcamry]

How is it possible to buy 1/3 of a stock ??

[@financemark]

Binomial pricing works on the idea that you could multiply it out. So, if you multiply everything by 99 (say), you can end up with normal units. That said, many organisations now allow fractional purchases.

[@adventures1670]

What takes my professor 3 1 hour lectures in college takes you 10 minutes to explain perfectly. Some professors should be fired.

[@jeffreyanderson5333]

and That 3 1 hour lectures cost a lot of money

[@Alexander123321ify]

will the call and put value always be the same in most occasions?

[@financemark]

Often they will not be the same. The put-call parity formula establishes the relationship between put and call prices (ie they can be the same, but they need not be)

[@ExcelTutorials1]

good stuff

[@brandonspiegel2293]

Thank you for the amazing video!!!!!!!!!!! AMAZING!!!!!

[@financemark]

Thanks so much! I'm glad it was helpful :)

[@alaataktokani8884]

thank u

[@reneefongg]

thank you !

[@financemark]

Thanks! I'm glad it was helpful

[@bitanyagebremichael9600]

you're a legend! God bless you, in the name of the Lord Jesus Christ, I pray thankfully. Amen. You really provided clarity to me :)

[@hankmoody666]

Seems like a great video, but this is confusing as fuck to me as a person who haven't had any finance subjects before. Need to watch it a couple of times to let it sink in.

[@financemark]

Thanks! It is a tricky concept. It gets easier over time. I found that just doing a whole lot of practice examples helps to drill it in myself.

[@investwithvincent6329]

Something is wrong here. How come we are shorting? I see no logic presented in terms of why a short is being performed here

[@investwithvincent6329]

Your formula was unclear because it appears as though you used a .5 / .5 probability pattern. you should have done it for multiple periods and should have given us an example using something like .2 and .8 as the weighted probabilities.

[@financemark]

The video is free, so you should pay before making demands

[@investwithvincent6329]

​@@financemark or it's probably free because it's worth zero

[@financemark]

You watched it 🤷🏼‍♀️

[@investwithvincent6329]

@@financemark then I commented... instead of proving me wrong, you proved me right by getting into a verbal fight with me. Great Job... What kind of community are you developing here ?!

[@oumaimaboukhris4402]

What is the 1.1 on 6:30 4th step can you tell me please ?

[@abirkar4496]

It's the risk free return of 10%.