For an Option on Futures, the Volatility Is 35%, the Time

question 10

Multiple Choice

For an option on futures, the volatility is 35%, the time step is three months, and the risk-free rate is 5%. What is the Cox, Ross, Rubinstein parameter, u?

• A) 1.34
• B) 1.29
• C) 1.09
• D) 1.19

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Definitions:

Fitness Function

A concept used in genetics and evolutionary biology to measure an organism's ability to survive and reproduce.

Directional

Pertaining to or indicating the direction in which something is moving or facing; also refers to evolutionary changes in a population that favor a specific set of traits.

Stabilizing

A type of natural selection that favors the average individuals in a population, thus maintaining the population’s genetic stability over time.

Disruptive

Pertaining to a type of natural selection that favors extreme values of a trait over intermediate values, potentially leading to speciation.