Advanced Financial Accounting
The binomial model is a mathematical method used to calculate the theoretical value of options and other financial derivatives, incorporating the potential future movement of an asset's price over time. It is particularly useful in valuing share-based payments, allowing for different possible outcomes in the value of equity instruments based on fluctuating market conditions. This model supports the accounting for both equity-settled and cash-settled share-based transactions by providing a structured way to estimate fair value and recognize expenses accordingly.
congrats on reading the definition of binomial model. now let's actually learn it.