medium · FRM Part 1 Valuation and Risk Models
A risk-neutral 2-step binomial tree is used to value a1-year European put option with a strike of 100. The stock is at100, u = 1.1, d = 0.9, and r = 5% (continuously compounded).
What is the risk-neutral probability (p) of an up-move in each $6-month step?
- 0.6266
- 0.5000
- 0.7564
- 0.3734
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