Increasing the Number of Intervals in the Binomial Model Causes

question 2

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 the above.
• E)None of the above.

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Definitions:

Conveyed

Transferred or passed on ownership, rights, or properties from one person to another.

Immediate Possession

Immediate possession refers to a legal situation where an individual or entity has the right to take control of a property or asset without delay.

Hayfield

A field where hay is grown, usually for agricultural purposes such as feeding livestock.

Reversion

A return to a previous state or condition.