Revision as of 18:06, 14 May 2023 by Admin (Created page with "'''Key: A''' The risk-neutral probability of an increase is: <math display = "block"> 1-q = \frac{e^{0.0275*0.5}-d}{u-d} = 0.44003 </math> Then <math display = "block"> 2...")
Exercise
ABy Admin
May 14'23
Answer
Key: A
The risk-neutral probability of an increase is:
[[math]]
1-q = \frac{e^{0.0275*0.5}-d}{u-d} = 0.44003
[[/math]]
Then
[[math]]
2.482 = e^{−0.0275*0.5} ((1 − q)*0 + q *( S − 4.5 − 0.7966S )) \Rightarrow S = 44.22
[[/math]]
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