Introducing the binomial simulation method in the undergraduate algorithms course

We introduce a new algorithm called binomial simulation method in undergraduate computer science program. The binomial simulation method is a simple and effective method to model real-world phenomena that involve up and down movements, and has been successfully used in many financial calculations. Unfortunately it has not been introduced in any algorithms textbook or course for undergraduate computer science students. In this paper, we demonstrate how the binomial simulation method can be used to determine the price of options, analyze the techniques used in this method, and discuss the general binomial simulations. Then we summarize the benefits of introducing this method in the undergraduate algorithms course in terms of meeting the ACM/IEEE CS2008 Curriculum requirements.