binomial model

binomial model
Also known as the binomial option pricing model or the lattice model. A financial option pricing model to estimate the expected value of share-based payments using the variables of dividend yield, exercise period, exercise price, market price, risk free rate of return and share price volatility. The model is used to value executive share options and other long-term incentives. Unlike the Black-Scholes model, it takes into account the fact that executive share options have multiple exercise dates.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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