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Identify the evidence behind the weight
The two-state pricing weight is derived from S0, terminal prices and the period factor. An actual probability may come from a statistical estimate or stated view. A 50% figure in one role does not make it interchangeable with another 50% figure.
Keep outputs named precisely
| Feature | Pricing weight | Actual probability |
|---|---|---|
| Input basis | Price/financing consistency | Forecast or observational assumption |
| Purpose | No-arbitrage model valuation | Actual expected outcomes |
| Risk-free discount | Used within the pricing model | Not automatically justified |
| Tool status | Computed from the record | Not accepted as a substitute |
Avoid claiming the model predicts the branch
A binomial tool can price within its given state set without estimating how often a real market reaches either state. Validation of that state set and forecasting skill are separate tasks.
Reconcile disagreements by question
Different expected-payoff amounts can be correct under different weights. Before calling a number wrong, inspect the measure, date and valuation assumptions. A label that only says probability is insufficient.