Difference between n step binomial tree and lattice

Discussion in 'SP6' started by Cataclyz, Apr 17, 2015.

  1. Cataclyz

    Cataclyz Member

    Thanks for previous replies. In the notes it says n step binomial trees can be used to model path dependant derivatives but a binomial lattice cannot. What is the difference between them? Is it one is recombining and the other is not?
     
    Cataclyz, Apr 17, 2015
    #1
  2. manish.rex

    manish.rex Ton up Member

    This is because it is trivial to determine the complete path uniquely in n step binomial, while in lattice structure we cantt do this
     
    manish.rex, Apr 18, 2015
    #2

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