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:

Price Hike

An increase in the listed price of goods or services, often due to increased costs or higher demand.

Sales Forecast

An estimate of the amount of products or services a company expects to sell in a future period, which is crucial for budgeting and planning purposes.

Net Operating Income

The profit a company makes from its regular business operations, excluding expenses and revenue from non-operational activities.

Price Hike

A general increase in the cost of goods and services, often due to inflation or increased production costs.