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Option Pricing TheoryEssay Preview: Option Pricing TheoryReport this essayTABLE OF CONTENTS3.1.1.3.1.2.3.1.3.3.1.4.4.1.1.4.1.2.4.2.1. Advantages and Limitations of the Binomial Tree Model…………19INTRODUCTIONThe most popular example of a derivative securities is options, which represent a contract allowing one side to buy (in the case of a call option) or to sell (the case of a put option) a security.