Calculation of call option using trinomial tree method and black-scholes method case study of Microsoft Corporation

Abstract Options are one of the most commonly known financial instrument used in financial market. Options are expected to minimize risk or even increase profits in stock trading. Therefore, it is important for options traders to take into account the contract price of options. This study discusses the determination of call option prices using the Trinomial Tree method and the Black-Scholes method with the data of Microsoft Corporation’s stock price and strike price. From the result of the calculations, a conclusion will be drawn from the comparison of the use of the two methods. In conclusion, the call option price using the trinomial tree method is close to the call option price using the Black-Scholes method. Therefore, the Trinomial tree method and the Black-Scholes method is worth using for the base calculation of option pricing.