As the Number of Steps in the CRR Binomial Tree

question 10

Multiple Choice

As the number of steps in the CRR binomial tree increases (keeping maturity fixed) , the solution "converges" to a limit result. Which of the following statements characterizes this convergence best?

• A) The solution results in the Black-Scholes formula.
• B) The convergence may be oscillatory for even and odd number of steps in the tree.
• C) The convergence may be monotonic for even and odd number of steps in the tree.
• D) All of the above.

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