easy · Quantitative Finance
In a single-period binomial model, a stock currently at $100 will move to either $120 (u=1.2) or $90 (d=0.9).
If the risk-free growth factor over the period is 1.02, what is the risk-neutral probability p^* of an up move?
- 0.33
- 0.60
- 0.50
- 0.40
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