(Technical) In binomial tree models, as we shrink the time interval on the tree, will the final...

Question:

(Technical) In binomial tree models, as we shrink the time interval on the tree, will the final return distribution of the stock price always converge to the normal distribution?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Derivatives Principles And Practice

ISBN: 9780078034732

2nd Edition

Authors: Rangarajan Sundaram

See More Books

Question Posted: Jan 10, 2024 01:00 AM

See More Questions

List three specific parts of the Case Guide, Objectives and Strategy Section (See below) that you had the most difficulty understanding. Describe your current understanding of these parts. Provide...
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...
Repeat Question 3 but with = 0.20 and = 0.20. Repeat Question 3 Suppose you wish to approximate the distribution of a stock price three months from now using a binomial tree with 100 steps. Suppose...
The Kroger Company reported the following data in its annual report (in millions). Instructions a. Compute Kroger?s inventory turnovers for fiscal years ending January 28, 2017, and January 30, 2016,...
Identify each of the colored positions?red, blue, and green?as axial or equatorial. Then carry out a ring-flip, and show the new positions occupied by each color, Ring-flip
A new car is purchased for $12,000 with a 0% down. 9% loan the loan's length is 4 years. After making 30 payments, the owner desires to payoff the loan's remaining balance. How much is owed?
Brooke Young runs Young Yachting Pty Ltd. Brooke is a graduate of a tourism and hospitality degree and offers a luxury fully catered yachting holiday experience that includes scuba diving, swimming...
ABC, cost hierarchy, service (CMA, adapted) Plymouth Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system,...
The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell...
For a binomial tree with the probability of 0.01 of an outcome of 1 and a probability of 0.99 of an outcome of 0, what are the mean and variance of the payoff?
(Technical) Suppose that the continuously compounded returns in each period are normal but are not always independent from period to period. Will the final stock price after all periods be lognormal?
Visit the Bankrate.com home page at the following address: www.bankrate.com Search the site for information on CDs, money market accounts, and other interest-bearing products. Look for links under...
Describe what interdependence means for how a small group system functions.
An office building has 200 occupants, each of whom uses 3.5 gallons of hot water per day for 250 days each year. The temperature of the water as it enters the heater is 55F (an annual average). The...
Determine the annual evaporative losses from a 3,500-ft2 indoor swimming pool with indoor conditions of 78F and 60 percent relative humidity (RH). The water temperature is kept at 85F throughout the...
Ask individuals how they have used technology (email, Facebook, wikis, Twitter, and so forth) as supplements to face-to-face meetings. In what ways do these technologies help or impede group...
List all the groups to which you belong. Be sure to include family groups, friendship and other social groups, activity groups, committees, work teams, athletic teams, classroom groups, study groups,...
Lets be more practical. DCF is not the only gospel. Many managers have become too absorbed with DCF. Can such a statement be justified? Why?
A consultant is beginning work on three projects. The expected profits from these projects are $50,000, $72,000, and $40,000. The associated standard deviations are $10,000, $12,000, and $9,000....
Callaghan Motors bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8 percent. The bonds have a yield to maturity...
Wilson Wonders bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10 percent. The bonds sell at a price of $850....
Thatcher Corporations bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8 percent coupon rate, paid semiannually. The price of the bonds is $1,100. The bonds are callable in...
Honey Enterprises had the following investing activities: Cash paid to purchase land $107166 Cash received from sale of building $553715 Cash paid to purchase equipment $27429 Determine the Cash...
Why the outputs of Risk monitoring and Control process are critical in all projects? Given at least 2 reasons.
Major Inc. places in service a copier on July 4, 2022 with a capitalized cost of $14,783. No other assets were placed in service during the year. Total taxable income for Major Inc., before any cost...

(Technical) In binomial tree models, as we shrink the time interval on the tree, will the final...

Question:

Step by Step Answer:

In general the Central Limit Theorem one of the most import...View the full answer

Derivatives Principles And Practice

Students also viewed these Engineering questions