There are differences between the 2 methods however both should produce the same results. Binomial model i think just assumes there are 2 time periods when evaluating the call option. One method, which i dont really know the name of requires you emulate the pay off of a call option by calculating an amount which you need to borrow.. to me its sorta like 'homemade leverage'. The other way is like you described, 'risk neutral method'.
Probably best to learn both ways as they will probably ask us both ways. Chances are if you get different answers, the 'homemade leverage' method is probably where you went wrong.
Probably best to learn both ways as they will probably ask us both ways. Chances are if you get different answers, the 'homemade leverage' method is probably where you went wrong.