Question: You are constructing a 100-period binomial tree to represent a 91-day ( 0.2493-year) horizon. The risk-free rate for the given horizon is 4% in annualized

You are constructing a 100-period binomial tree to represent a 91-day (≈ 0.2493-year) horizon. The risk-free rate for the given horizon is 4% in annualized continuously compounded terms. The underlying asset has a volatility of 38%. What are the parameters of the binomial tree if you use the JR solution? What is the risk-neutral probability in the constructed tree?

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The interval on the binomial tree will be h 02493100 0002493 In t... View full answer

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