The One-Step Binomial Model Assumes That at the End of the Option

question 64

Multiple Choice

The one-step binomial model assumes that at the end of the option period,the call will have appreciated to S_uT = S₀u or depreciated to S_dT = S₀d.How is u calculated?

• A)1/d
• B)e^(σt^0.5)
• C)both 1/d and e^(σt^0.5)
• D)none of these options

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