Use the Fact That the Pseudo-Probability of Default at Time

question 16

Multiple Choice

Use the fact that the pseudo-probability of default at time zero is (1/ 2) to answer the questions that follow.
-Consider a caplet with maturity time 1 and strike price 0.035.What are the payoffs to the option at time 1 in the up and down nodes?

• A) 0.0307,0.0402
• B) 0.0042,0.0000
• C) 0.0354,0.0056
• D) 0.0050,0.0050
• E) 0.0000,0.0050

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Definitions:

Neurotransmitter

Biochemical substances that facilitate communication between neurons in the nervous system by transmitting signals across synapses.

Serotonin

A neurotransmitter that plays a key role in mood regulation, digestion, sleep, and other bodily functions.

Dopamine

Dopamine is a neurotransmitter that plays a pivotal role in the brain's reward system, influencing mood, motivation, and motor control.

GABA

Gamma-aminobutyric acid, a neurotransmitter in the brain that plays a key role in regulating nerve excitability and muscle tone.