= Trinomial tree
{title2=$p_d=ka/h^2-kb/(2h),\quad p_m=1-2ka/h^2,\quad p_u=ka/h^2+kb/(2h)$}
A trinomial tree allows three next-step states. For the <explicit log-price scheme for local-volatility pricing> these are $x-h,x,x+h$, with the displayed weights. They sum to one; if nonnegative they are transition probabilities and make backward pricing a conditional average. Their first two increment moments are $bk$ and $2ak$, matching the diffusion to first order in the time step. Coefficients can depend on the node, so the tree need not have constant transition probabilities.
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