Counting paths and the binomial formula

Many different up/down routes can end at the same price. Count routes with Pascal’s triangle, find the chance of one route, then combine them to build the binomial formula.

Nine illustrated steps connect counting, independent probabilities, a normal approximation and a risk-neutral pricing example. Zon asks why, reads the notation and explains his understanding.

This shared lesson appears in Math foundations and Quant finance. The interactive and recorded classroom are available with lesson access.

A recombining tree groups different up/down routes by their ending and shows Pascal’s path counts.

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