Suppose you wish to approximate the distribution of a stock price three months from now using a
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Suppose you wish to approximate the distribution of a stock price three months from now using a binomial tree with 100 steps. Suppose also that the stock price distribution is given to be lognormal with μ = 0.04 and σ = 0.40. What values would you use for the parameters of the binomial model?
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As explained in the chapter one solution the CRR solution is to use u exp sp ov T 1 a...View the full answer
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