medium · Quantitative Finance
A stock is modeled on a two-step binomial tree. At the lower mid-tree node (S_down), the two possible successor payoffs at expiry are 0 (for the up move) and 24.64 (for the down move).
If the risk-neutral up-probability is p = 0.5539 and the discount factor for one step is e^-rΔ t = 0.9753, what is the value at the S_down node?
- 13.65.
- 10.99.
- 24.03.
- 10.72.
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