The binomial model has been used to price a wide variety of equity and interest rate options for more than two decades. Originally developed by Cox, Ross, and Rubinstein to clarify the basic pricing principle of its continuous-time counterpart with reduced mathematical requirements, the approach...

In the past decades several versions of the binomial model for option pricing, originally introduced by Cox, Ross, and Rubinstein, have been discussed in the finance literature. Some of these approaches model an arbitrage-free market in the discrete setup whereas others attain this property only...

Three years after the seminal work of Black and Scholes on the pricing of European options, Scholes presented a paper in which the impact of taxation on the value of an option is analyzed. We restart this discussion in a simple binomial setting emphasizing the economic principles of replicating...