Binomial Option Pricing

[karafrylee]

I'm just wondering, is possible to use Binomial option pricing to price European option? Because I've read that it is for American option.

 

[Tsotne]

I'm just wondering, is possible to use Binomial option pricing to price European option? Because I've read that it is for American option.

Yes it can be used for European options also. But the binomial trees are not that much used for European options, since the Black Scholes model will give the correct answer, but it is useful to see the construction of the binomial tree without the checks for early exercise, which is the American case.

 

[quotes]

Sure you can. But there are better ways to evaluate an European Option.

 

[Sim Con]

Here's a spreadsheet to price a European option with a binomial tree: http://investexcel.net/736/binomial-option-pricing-excel/
And another one to price an American option with a binomial tree: http://investexcel.net/1095/binomial-tree-american-option/