The Cox-Ross-Rubinstein model made option pricing computable numerically.

Evidence

One particular product of the work of Cox and Ross was to take on a special practical significance, as we shall see in chapter 7. This arose from a collaboration between them and Mark Rubinstein, a finance academic at the University of California at Berkeley who had particular expertise in the applications of computing to finance. The Cox-Ross-Rubinstein model (sketched in appendix E) was an attractive practical alternative to Black-Scholes. It was especially suited to implementation on a digital computer, and if the computer was powerful enough the Cox-Ross-Rubinstein model allowed option-pricing problems that were difficult or impossible to solve by analytical techniques to be solved numerically. — Donald MacKenzie, An Engine, Not a Camera, 618

Categorization

• XREF: connects to: The dynamic hedge ratio at the core of option pricing resisted analytic solution. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 577; All later option-price models are consistent refinements of Black-Scholes-Merton — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 624; Numerical backward recursion solves option problems that resist analytic solution — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1287

Broader Connections

• The dynamic hedge ratio at the core of option pricing resisted analytic solution. #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 577