Consider a T-period Binomial model. Define S = S/B, for t = {0, 1,,T} ({S} is...
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Consider a T-period Binomial model. Define S = S/B₁, for t = {0, 1,,T} ({S} is called the discounted stock process. Show that EP [SF-1] = Sfort e {1,2,... T} where p = (1 + r-d)/(u-d) denotes the risk-neutral probability. Consider a T-period Binomial model. Define S = S/B₁, for t = {0, 1,,T} ({S} is called the discounted stock process. Show that EP [SF-1] = Sfort e {1,2,... T} where p = (1 + r-d)/(u-d) denotes the risk-neutral probability.
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