This applet simulates the Binomial Trees model. The "up" and "down" factors u and d are calculated from the mean log return and volatility parameters entered. The number of steps should be an integer between 1 and 498 (it will not work for larger values). Increasing the number of steps will give an increasingly good approximation to the continuous-time Geometric Brownian Motion model used in the Black-Scholes analysis. The applet was written by Camilla Jordan and Jonathan Jordan. |