| Summary: | Binomial tree is a method that can be used to determine price option contracts. In this method, the stock price movement is presented in the form of a tree with each branch representing the probability of the stock price to move up or move down. The purpose of this paper was to determine the price of the options contracts with the American type on Binomial Tree method and compare the three methods that is variance matching, proportional , and risk neutral of determining the value of price option contracts used in Binomial Tree method with Black-Schole method. The result of this research was the value of the options contract using the variance matching more similar with the value of the Black-Scholes contract.
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