Which of the Following Statements Is False

question 35

Multiple Choice

Which of the following statements is false?

• A) After we have constructed the tree and calculated the probabilities in the risk-neutral world, we can use them to price the derivative by simply discounting its expected payoff (using the risk neutral probabilities) at the risk-free rate.
• B) By using the probabilities in the risk-neutral world we can price any derivative security-that is, any security whose payoff depends solely on the prices of other marketed assets.
• C) To ensure that all assets in the risk-neutral world have an expected return equal to the risk-free rate, relative to the true probabilities, the risk-neutral probabilities underweight the bad states and overweight the good states.
• D) In Monte Carlo simulation, the expected payoff of the derivative security is estimated by calculating its average payoff after simulating many random paths for the underlying stock price.

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Definitions:

Social Territory

The concept refers to spaces or domains where social groups establish norms, rules, and identities, influencing how they interact and behave within those spaces.

Semipublic Places

Areas or settings that are not wholly public or private, where access is controlled or restricted to certain groups.

Third Places

Public places on neutral ground where people can gather and interact, such as cafes, parks, or community spaces.

Informal Gathering

A casual assembly of individuals or groups without formal structure or agenda, typically for social interaction.