Abstract
How much to spend on an option contract is the main problem at the task of pricing options. This
become more complex when it comes to projecting the future possible price of the option. This is attainable if one
knows the probabilities of prices either increasing, decreasing or remaining the same. Every investor wishes to make
profit on whatever amount they put in the stock exchange and thus the need for a good formula that give a very good
approximations to the market prices. This paper aims at introducing the concept of pricing options by using
numerical methods. In particular, we focus on the pricing of a European put option which lead us to having
American put option curve using Trinomial lattice model. In Trinomial method, the concept of a random walk is
used in the simulation of the path followed by the underlying stock price. The explicit price of the European put
option is known. Therefore at the end of the paper, the numerical prices obtained by the Black Scholes equation will
be compared to the numerical prices obtained using Trinomial and Binomial methods