Abstract
Abstract We have described binomial lattices for modelling a security or interest rate movements, and we have shown how these models are used for valuing securities in the capital markets and for determining optimal decisions in corporate finance. In the capital markets, we can use binomial lattices to value a broad range of securities, such as securities” whose value may depend on multiple risk sources and optimal decisions of the investors or the issuers. In corporate finance, we have shown how the binomial lattice can be used in corporate and strategic investment decisions. This framework provides us with tools to determine optimal corporate decisions, and relate to the capital market by showing how corporate decisions affect the equity and bond prices of a firm. There fore, this binomial lattice framework provides a flexible and intuitive analytical tool for financial modelling.
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