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The One-Step Binomial Model Assumes That at the End of the Option

Question 64

Multiple Choice

The one-step binomial model assumes that at the end of the option period,the call will have appreciated to SuT = S0u or depreciated to SdT = S0d.How is u calculated?


A) 1/d
B) e^(σt0.5)
C) both 1/d and e^(σt0.5)
D) none of these options

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