Easy Binomial Trees in Excel

This is a quick guide on how to do binomial trees in Excel. These tree's are used for options pricing, but I won't be going into details about that. If you want to learn more, there is a bunch of material over at Investopedia.com
I recommend going over these videos if you're not familiar with some of the concepts in the video.
Cell Referencing
Nested If-Statements: • Nested If-Statements i...

[@YAH00123321]

You're an absolute champion mate, thank you

[@tamjidkhan1237]

Hi, when I apply the stock price formula, my value seems to be always +100 to what it should be, could you please help. Great video!

[@aricanto1764]

ONE MISTAKE in this video: in the video it is stated C = (pCu + (1-p)Cd)(1+r); however, the model should instead be C = exp(-r*deltaT)*(pCu + (1-p)Cd)

[@threos4903]

The formula in the video is stated as (p*C_u + (1-p)*C_d)/(1+r), which is correct. The formula that you suggest is also correct, it all depends on our choice of the interest model e.g. you chose continuous model, where the formula for discount factors is: DF(T) = exp(-r*T).

[@aricanto1764]

@@threos4903 yes, I realised this while writing my paper but made the comment while still learning the concepts. There are various Binomial Lattice 'parameterisations', 1st is Cox-Ross Rubenstein, others include Jarrow-Rudd, and TIAN (3 or 4 moments of GBM matched). I found a website somewhere which distinguished between them and there are various research papers comparing model efficacy (TIAN tends to perform best)

[@PONYBLESSEDCUCUMBER]

oh my my! This video HELPS! Cheers to Excel Video Tutorials!

[@AshleyDuker]

Is there also a video about the put?

[@carlosquitosantillan4356]

At the end the value of the option or the premium is 32.2? right?

[@bensonmwileli5035]

This is a great video. Very helpful! How could I adapt this to price American options?

[@sytzekuipers5694]

Nice video! Do you have a link to the file?

[@supradg]

Hello, I liked the video very much. And it seems to be working for me. However, I had a comment: In Excel, when you take the values for cells on the right (for the Call Option), it is also taking values of the cells outside the box. So I am not getting a tree as in the first part when just calculating the prices. For each of the columns, all the rows are until the first box!

[@Chiel043]

What about the put?

[@kipkiruimr.]

You did not do the put values

[@lucasvasconcelos9156]

Nice vídeo man!Hey what do you think about use this technique to value enterprises?You could apply it to value a mine, a oil company for example.

[@J_Money1]

I work in financial derivatives. Not qualified enough to know about that. However, if you're referring to publicly traded oil companies, why not? Just be sure to understand swap dealers have teams of quantitative traders building much more complicated models than this with many more inputs and variables.

[@MrAndersencole]

Very nice video! I have one question though, when pricing the call, the p, and 1-p values, how did you determine them?

[@fredou129]

1-p=(u-R/u-d) R is given u is up and d is down