Which of the Following Statements Is INCORRECT About the Binomial

question 11

Multiple Choice

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

• A) The binomial model had been used as a teaching tool at MIT and other places before its publication.
• B) The binomial model was first printed in Sharpe's classic textbook Investments.
• C) Cox,Ross,and Rubinstein;Rendleman and Bartter;and Jarrow and Rudd developed popular versions of the binomial model.
• D) The binomial model is accurate because in the real world,stock price usually goes up or down with only two possible values.
• E) Unlike the cost-of-carry models which can be priced with the help of the "no-arbitrage principle" alone,option-pricing models need an explicit assumption about the evolution of stock prices.

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Definitions:

Sector

A distinct part or area of the economy or a market, characterized by a specific subset of activities or goods.

Market

A place or system where buyers and sellers interact to trade goods, services, or resources.

Factor Market

A marketplace for the services of a factor of production (such as labor, capital, or land), where these services are bought and sold.

Households

Units of individuals living together, making economic decisions as a single entity, often a family or people sharing living space.