American Option Pricing via Binomial Tree - Quant Researcher Interview Question
Difficulty: Hard
Category: derivatives
Asked at: Jane Street, IMC, Akuna, SIG, Belvedere Trading, Citadel Securities, Optiver, Goldman Sachs
Topics: options, pricing, dynamic-programming, numpy
Problem Description
The Cox-Ross-Rubinstein (CRR) binomial tree model is a fundamental numerical method used to price American options, which allow for early exercise prior to expiration. By modeling asset price evolution as a recombining tree, this approach utilizes backward induction to compare the intrinsic value of immediate exercise against the continuation value of holding the option at each node. This technique is critical in quantitative finance for valuing derivatives where closed-form solutions are unavai
Practice this hard researcher interview question on MyntBit - the LeetCode for quants with 200+ quant interview questions for Jane Street, Citadel, Two Sigma, and other top quantitative finance firms.