Increasing the Number of Intervals in the Binomial Model Causes

question 14

Multiple Choice

Increasing the number of intervals in the binomial model causes the price shift parameters to change. New estimates are related to:

• A) the standard deviation of the underlying asset.
• B) the up state multiplier equals the standard deviation divided by root n.
• C) the number of intervals in a year.
• D) All of these.
• E) None of these.

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Definitions:

Technological Application

The use or implementation of technology for practical purposes, especially in industry or commerce.

Research and Development Spending

Financial investments in the innovation, improvement, and development of new products, services, or technologies.

Government Proportion

This term is not standard and may refer to the ratio or percentage of government spending or representation in relation to something specific, such as GDP or population, but without more context, a precise definition cannot be provided.

Risk Society

A society increasingly preoccupied with managing and preventing risks, especially those that are man-made, such as environmental disasters, technological accidents, and financial crisis.