Multiple Choice
The risk-neutral probabilities for an asset, with a current value equal to the present value of future payoffs are:
A) given by the probability of each state occurring.
B) given by the value of the underlying asset under good news and the risk free rate.
C) given by the value of the underlying asset under good news and bad news.
D) given by the value of the underlying asset under good news, bad news, and the risk free rate.
E) None of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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