(Difficult) Compare the replication of an option in a binomial model versus replication in a trinomial model...

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(Difficult) Compare the replication of an option in a binomial model versus replication in a trinomial model by answering the following questions:

(a) How many securities do we need to carry out replication in each model?

(b) Is the risk-neutral probability defined in each model unique?

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Derivatives Principles And Practice

ISBN: 9780078034732

2nd Edition

Authors: Rangarajan Sundaram

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Question Posted: Jan 10, 2024 01:00 AM

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(Difficult) Compare the replication of an option in a binomial model versus replication in a trinomial model...

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Derivatives Principles And Practice

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