Two-state option pricing model

Definition:

A pricing equation allowing an underlying asset to assume only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the binomial option pricing model.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Project

The asset constructed with or owned via a project financing, which is expected to produce cash flow at a debt-service coverage ratio sufficient to repay the project financing.

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