Which of the Following Statements About the Multiperiod Binomial Option

question 15

Multiple Choice

Which of the following statements about the multiperiod binomial option pricing model is INCORRECT?

• A) The pricing technique is described as forward induction.
• B) The pricing technique is described as backward induction.
• C) When the model's parameters are properly set and the model is run over many small intervals,then it gives an answer that approaches the Black-Scholes-Merton model value.
• D) The binomial model can be used to price exotic options.
• E) Strictly speaking,the binomial model is not a separate model but an approximation method.

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