Consider a Binomial Tree Setting in Which in Each Period $u > 1$

Multiple Choice

Consider a binomial tree setting in which in each period the price goes up by $u > 1$ (with probability $p$ ) or down by $d < 1$ (with probability $1 - p$ ) . The risk-free interest rate per time step is zero, so a dollar invested at the beginning of the period returns a dollar at the end of the period. In this setting, the risk-neutral probability of an at-the-money two-period put finishing in-the-money is _____________ as that of a one-period at-the-money put finishing in-the-money.

A) At least as high.
B) At most as high.
C) Equal to.
D) More than one of the above is possible depending on the parameters.