a) Consider the following binary one-step model (left(S_{t}ight)_{t=0,1,2}) with interest rate (r=0) and (mathbb{P}left(S_{1}=2ight)=1 / 3). b)
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a) Consider the following binary one-step model \(\left(S_{t}ight)_{t=0,1,2}\) with interest rate \(r=0\) and \(\mathbb{P}\left(S_{1}=2ight)=1 / 3\).
b) Consider the following ternary one-step model with \(r=0, \mathbb{P}\left(S_{1}=2ight)=1 / 4\) and \(\mathbb{P}\left(S_{1}=1ight)=1 / 9\).
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a We denote the riskneutral measure by p P S 2 q P S 1 i Yes No Comment No loss is possible while a ...View the full answer
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Related Book For 
Introduction To Stochastic Finance With Market Examples
ISBN: 9781032288277
2nd Edition
Authors: Nicolas Privault
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