| dc.description.abstract | Investors have purposes to obtain maximum returns, but they must be careful to invest their money because they may take risk. Therefore, they need products to reduce the risk. The products are called derivative products. There are many kinds of derivative products, such as options. An option is a type of contract between two parties. One party gives the other party a right to sell or to buy some assets in a certain price and in a certain period. Based on their execution time, there are two types of options i.e. European styles and American styles. European style options can only be exercised at expiration time, meanwhile American style options can be exercised at random time to the expiration time. In this paper, the option price at a discrete time will be determined by using binomial model. A binomial model is a model that describes asset price movements by assuming two possibilities of asset price movements in the future. Those are up and down. One-step binomial structures can be expanded into multistep binomial structures in order to approximate the option price. The application of one-step binomial model is used on the European option and multi-step binomial model is used on the American option. The acquired formula is applied to calculate the value of call option of PT Telekomunikasi Indonesia stocks in January 2012 based on the data of January to December 2011’s fluctuation of stock. | en |
