Numerical Approaches of Pricing European Options in The Cox-Ross-Rubenstein Models

Abstract

The Cox-Ross-Rubinstein (CRR) market mode is used to price European and American Options without complex elements, including dividends, stocks, and stock indexes paying a continuous dividend yield, futures, and currency options. The model is an elegant, simple, but strong model to explain the general economic intuition behind option pricing and its principal techniques. In the paper, the CRR model's numerical elements and equations are indicated, and a practical event is examined to demonstrate the application of the model in the financial market. To make it easier to understand, figures, including tables and graphs, are also included to visualize and simplify the model and output data.