medium · Quantitative Finance
In a two-step binomial model, a stock currently at $100 moves up by a factor u = 1.1 or down by d = 0.9 each step.
If the risk-neutral probability of an up move is p = 0.6, what is the expected stock price at the end of two steps under the risk-neutral measure?
- 102.00
- 104.04
- 100.00
- 121.00
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