The Binomial Option Pricing Model Will Converge to What Value

question 5

Multiple Choice

The binomial option pricing model will converge to what value as the number of periods increases?

• A) a random value
• B) the Black-Scholes-Merton value of the option
• C) the intrinsic volatility of the option
• D) the true value of the underlying
• E) none of the above

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Definitions:

Working Memory

A system for temporarily holding and manipulating information necessary for cognitive tasks such as learning, reasoning, and comprehension.

Mnemonics

Memory aids, often involving patterns or associations, such as phrases or rhymes, that facilitate the recall of information.

Peg Methods

Mnemonic techniques for memory enhancement in which items to be remembered are associated with a list of peg words known in a specific order.

Verbal Organizations

Structures and procedures for arranging words and phrases systematically to create meaningful language or discourse.