# Binomial options pricing model

## Numerical method for the valuation of financial options / From Wikipedia, the free encyclopedia

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In finance, the **binomial options pricing model** (**BOPM**) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" (lattice based) model of the varying price over time of the underlying financial instrument, addressing cases where the closed-form Black–Scholes formula is wanting.

The binomial model was first proposed by William Sharpe in the 1978 edition of *Investments* (ISBN 013504605X),[1] and formalized by Cox, Ross and Rubinstein in 1979[2] and by Rendleman and Bartter in that same year.[3]

For binomial trees as applied to fixed income and interest rate derivatives see Lattice model (finance) § Interest rate derivatives.