For a Specific Futures Option, Given D =

question 3

Multiple Choice

For a specific futures option, given d = .813 and u = 1.367, what is the risk neutral probability of an up move in the price of the option?

• A) 41.87 %
• B) 43.54 %
• C) 47.98 %
• D) 56.46 %

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Definitions:

Finite Population Correction Factor

A factor applied to the calculation of sampling error when sampling without replacement from a finite population.

Infinite Population

A theoretical concept in statistics where the population size is considered boundlessly large.

Standard Deviation

An indicator that measures the level of disparity or distribution of values in a dataset from its mean.

Sampling Distribution

The probability distribution of a given random sample-based statistic.