Let = $100, = 0.30, = 0.08, = 1, and = 0. Using equation (11.12) to compute the probability of reaching a terminal node and i n−i to compute the price at that node, plot the risk-neutral...


Let

= $100,

= 0.30,

= 0.08,

= 1, and
= 0. Using equation (11.12) to compute the probability of reaching a terminal node and


i



n−i

to compute the price at that node, plot the risk-neutral distribution of year-1 stock prices as in Figures 11.7 and 11.8 for

= 3 and

= 10.


equation (11.12)



May 05, 2022
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