Binomial option pricing model

A binomial option pricing model is a lattice-based method used to assign values to options. The model divides the option period into small increments, allowing the user to model for changes in the propensity of an option owner to exercise the option over time as the market price of the underlying shares varies upward or downward. The model can be designed to take into account a number of additional factors, such as forfeiture and vesting restrictions. For each time increment, the model user can evaluate the probability of an option being exercised, and at what price.