# Backward Induction

*Quant & Pricing — Finicade finance glossary*

Pricing by starting at the payoff and working backwards step by step to today. It's how binomial trees are solved and the natural way to value options that can be exercised early.

**Related terms:** [Binomial Tree](https://finicade.com/glossary/binomial-tree), [American Option](https://finicade.com/glossary/american-options), [Risk-Neutral Pricing](https://finicade.com/glossary/risk-neutral-pricing)

**Taught in:** Game Table — Backward Induction

Source: https://finicade.com/glossary/backward-induction