What is the relation between the binomial option pricing model and the Black-Scholes formula? There is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
What is the relation between the binomial option pricing model and the Black-Scholes formula? There is no relation (other than that they both price options), these are two different models The Black Scholes formula is the same as a binomial model with a very large number of up-down periods (and very small delta t) The Black Scholes formula is the same as a binomial model with a very small number of up-down periods (and very large delta t) The Black Scholes formula and the binomial model are the same for at-the-money options What is the relation between the binomial option pricing model and the Black-Scholes formula? There is no relation (other than that they both price options), these are two different models The Black Scholes formula is the same as a binomial model with a very large number of up-down periods (and very small delta t) The Black Scholes formula is the same as a binomial model with a very small number of up-down periods (and very large delta t) The Black Scholes formula and the binomial model are the same for at-the-money options
Expert Answer:
Answer rating: 100% (QA)
The detailed answer for the above question is provided below B The Black Scholes formula is the sa... View the full answer
Related Book For
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett
Posted Date:
Students also viewed these general management questions
-
What is the relation between return on net operating assets and sales? Consider both NOPAT sales and sales to net operating assets in your response.
-
What is the relation between culture and economics?
-
What is the relation between trade and world output?
-
The beam shown below is supported by a pin at A and a roller at B. The weight of the beam is 12 kN and a 15 kN force is applied 3 m to the right of A as shown. Determine the reaction forces at A and...
-
On June 30, Roman Co. has $125,900 of accounts receivable. Prepare journal entries to record the following selected July transactions. Also prepare any footnotes to the July 31 financial statements...
-
Find the Fourier transform of (without using Table III in Sec. 11.10). Show details. eka if x <0 (k> 0) if x>0 f(x) f(x) f(w) = F(f) (1 if -b
-
For each of the following situations, calculate the \(t\)-statistic \((t)\) : a. \(\mathrm{X}^{-}=.45 ; \mu=.52 ; s=.17 ; N=56\) b. \(\mathrm{X}^{-}=7.75 ; \mu=6 ; s=3.98 ; N=40\) c....
-
Lopez Company uses both standards and budgets. For the year, estimated production of Product X is 500,000 units. Total estimated cost for materials and labor are $1,400,000 and $1,700,000. Compute...
-
Discuss the economic benefits for primary and secondary markets. Briefly explain your understanding of an IPO, the net valuation of a firm and what can happen once the shares are traded on secondary...
-
Sandra?s Purse Boutique has the following transactions related to its top-selling Gucci purse for the month of October. Required: 1. Calculate ending inventory and cost of goods sold at October 31,...
-
Find approximate values for f'(x) at each of the x-values given in the following table. Use a right- hand approximation where possible. If a right-hand approximation is not possible, use a left-hand...
-
Consider the function f(x): = tan x + 3 secx. Evaluate the derivative of at x = 7/6. Answer: f' (7/6) = FORMATTING: Give an exact answer, not a decimal approximation. We write pi for and sqrt(a) for...
-
Problem 1: Determine whether f(x) 1]. (x+1 x0 = is piecewise continuous on [-1, x < 0 x Problem 2: Is the function f(x) = (x+1 1 (2x+1 x < 0 0 x 1 piecewise smooth on [-2,2]? x > 1 df(x) dx Note that...
-
2 7. Find the eigenvalues and corresponding eigenvectors of A = 2 -3 3 Show your work. 8. Find a nonsingular matrix P such that P-1AP is diagonal where A Bonus (10 points) Find an orthogonal matrix P...
-
4. Suppose u = (3, -2, 1) and v = (1, 4,-3). Find the orthogonal projection of u onto v. Show your work. proj,u = (u, v) (v, v) v. 5. Find the coordinate matrix of x = (4,-3) relative to the...
-
6. minimize x - y, subject to 1 < x + y < 4, 0 x 4, 0 y 4 min 3x36xy+3y s.t -1 x 1 7. 0 y 1 8. Find the dimensions (x,y,z) of a rectangular parallelepiped box such that the volume of the box is...
-
Determine the amount of the donation deduction for each of the following situations: (Assume all organizations are qualified public charities) A. Personal furniture given to a local church. FMV $500...
-
What kind of financial pressures can an LBO cause?
-
How is a DIs distribution pattern of net deposit drains affected by the following? a. The holiday season. b. Summer vacations. c. A severe economic recession. d. Double- digit inflation.
-
What are some of the major differences between futures and forward contracts?
-
An investment bank pays $ 33.50 per share for 4 million shares of GM Company in a firm commitment stock offering. It then can sell those shares to the public for $ 32 per share. How much money does...
-
You release three balls simultaneously from the same height above the floor. The balls all carry the same quantity of surplus positive charge, but they have different masses: \(1 \mathrm{~kg}, 2...
-
A proton, a deuteron (a hydrogen nucleus containing one proton and one neutron), and an alpha particle (a helium nucleus consisting of two protons and two neutrons) initially at rest are all...
-
Consider an isolated system of two identical electric dipoles as in Figure P25.6. For which orientation is the electric potential energy smaller? Data from Figure P25.6 (a) (b)
Study smarter with the SolutionInn App