Consider a Binomial Tree Setting in Which in Each Period $\mathcal { U } > 1$

question 21

Multiple Choice

Consider a binomial tree setting in which in each period the price goes up by $\mathcal { U } > 1$ (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,let $Q _ { 1 }$ be the risk-neutral probability of a one-period at-the-money call finishing in-the-money.and let $Q _ { 2 }$ be the risk-neutral probability of a two-period at-the-money call finishing in-the-money.Which of the following is true?

• A) \(Q _ { 1 } > q _ { 2 }\)
• )
• B) \(Q _ { 1 } < Q _ { 2 }\)
• )
• C) \(Q _ { 1 } = Q _ { 2 }\)
• )
• D)Depending on the parameters \(\mathcal { U }\)
• And
• \(d\)
• ,more than one of the above is possible.

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Definitions:

Key Personality Traits

Fundamental aspects or characteristics that constitute an individual's distinctive patterns of thoughts, behaviors, and emotions.

Borderline Personality Disorder

A syndrome of emotional instability affecting mood regulation, behavior, and the nature of interpersonal relationships.

Social Inequalities

Disparities in wealth, power, and prestige among different social statuses and groups in society.

Persistent Feelings

Ongoing and continuous emotions that may significantly impact an individual's mental health and well-being.