What Happens to the Price of an Option Using a Binomial

question 34

Multiple Choice

What happens to the price of an option using a binomial option pricing model with many periods as the numbers of periods increases?

• A) The model because useless for calculating the price of an option.
• B) The value of a put and a call option are less divergent.
• C) The put option price gets closer to zero and the call option price gets closer to infinity.
• D) The option price converges towards the option price from the Black-Scholes model.
• E) The time value of the option decreases exponentially with the number of periods.

---

Definitions:

International 24-Hour Clock

A timekeeping system that ranges from 00:00 to 23:59, used to avoid confusion between AM and PM times.

International 24-Hour Clock

A timekeeping system that runs from midnight to midnight, divided into 24 hours, used to avoid confusion between AM and PM hours.

Patient Rights

Legal and ethical guidelines that outline the rights of patients within the healthcare system, including consent, confidentiality, and informed decision-making.

DA-Style Equation

Equations or mathematical formulas that follow a specific approach or style, possibly related to differential algebra or another specialized mathematical area.