Suppose you are attempting to value a one- year maturity option on a stock with volatility ( i. e., annualized standard deviation) of σ 5 .40. What would be the appropriate values for u and d if your binomial model is set up using
a. 1 period of one year?
b. 4 subperiods, each 3 months?
c. 12 subperiods, each 1 month?