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Medium · options_pricing · Quant Researcher interview question · binomial_tree, crr, options_pricing, european_option, backward_induction
The Cox-Ross-Rubinstein (CRR) model provides a discrete-time approximation of the underlying asset's random walk to price options. It constructs a binomial lattice of possible future asset prices and uses backward induction to calculate the option value at each node. This numerical method is a foundational tool in quantitative finance for its flexibility in handling various option types and its convergence to the Black-Scholes model. Task Implement the function binomial_tree_option(S, K, T, r,