Recombining trees are a type of discrete structure used in financial mathematics to model the evolution of asset prices over time, allowing for various possible outcomes at each step. These trees are particularly useful in options pricing, as they help visualize the paths an asset price can take and enable the calculation of the value of derivatives at different nodes. The recombining aspect means that multiple paths can converge to the same future price, simplifying the calculations and reducing computational complexity.
congrats on reading the definition of recombining trees. now let's actually learn it.