Which of the Following Statements Is FALSE

question 5

Multiple Choice

Which of the following statements is FALSE?

• A)The techniques of the binomial option pricing model are specific to European call and put options.
• B)We can summarize the payoffs for the Binomial Option Pricing Model in a binomial tree-a timeline with two branches at every date that represent the possible events that could happen at those times.
• C)We define the state in which the stock price goes up as the up state and the state in which the stock price goes down as the down state.
• D)When using the Binomial Option Pricing Model,by the Law of One Price,the price of the option today must equal the current market value of the replicating portfolio.

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Definitions:

Excess Supply

A situation in which the quantity of a good or service provided exceeds the quantity demanded at a given price.

Market Equilibrium

A state where the supply of a product matches its demand, resulting in stable prices.

Quantity Demanded

The aggregate quantity of a product or service that buyers are prepared to buy at a given price.

Excess Supply

A situation where the quantity of a product offered for sale by producers exceeds the quantity that consumers are willing to buy at a given price.