An option pricing model which was developed by John Cox, Stephen Ross, and Mark Rubinstein. It was designed to address and include effects not dealt with in the Black-Scholes model, such as early exercise and price supports. This pricing model is commonly known as a generalized numerical method that can be used for a wide array of conditions because it is based on the underlying instrument spread over a period of time, instead of a single point in time.

The Cox-Ross-Rubinstein model uses the binomial tree technique (or binomial lattice) to trace the development of the underlying variable (the stock price, for example) over a specified period. Each node in the tree represents a price observation at a single point. Once the tree is constructed, the valuation proceeds iteratively, moving backwards from the final node to the first node. Therefore, the value obtained in each node reflects the option value at that node.