At each node, the probability of the stock price going up is equal to the probability of it going down. The probabilities of the stock price getting to each terminal value form a binomial distribution.

More from Jerry Marlow
Financial writing, real-estate writing, marketing writing
Financial writing powerful enough to persuade institutions and high-net-worth individuals to think and invest in a new way— your way
Hard hitting and persuasive writing about real-estate-development and construction- management issues
Real estate writing that moves properties in a down market
A recruiting brochure that will inspire the best and brightest to join your company
Press releases that seduce customers, advertisers, investors and business partners
Advocacy writing that furthers your social, animal-rights or humanitarian cause
Writing that guides reader thinking and behavior into transactions
Editing that transforms your colleagues' dull and narcissistic writing into powerful prose
Financial modeling, simulations, graphics, marketing and education
Financial writing and modeling creative enough to let non-mathematicians understand in a few minutes how stochastic calculus values derivative securities and other financial contracts
Financial modeling of and writing about Black-Scholes option-pricing theory lucid enough to win a five-star rating at amazon.com
Financial modeling, writing and simulations exciting enough to sell hedge-fund trading strategies
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An easy-to-follow seminar on how to value stock options in divorce proceedings
Financial modeling and writing convincing enough to persuade a judge not to value your ex-spouse's stock options at their so-called "intrinsic value."
An easy-to-use implied volatility calculators, dynamic volatility display engine and historical volatility calculator
A retirement risk simulator that helps you invest for retirement under conditions of uncertainty and calculate the probability that you'll run out of money before you die
Jerry Marlow, MBA
(917) 817-8659
jerrymarlow@jerrymarlow.com
Freelance financial writer, real-estate writing, marketing writing
Financial modeling, simulations, graphics, marketing and education