Suppose we let p 2 = 0 and write p 1 = p 3 = p in

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Suppose we let p2 = 0 and write p1 = −p3 = p in the trinomial scheme. By matching the mean and variance of ζ(t) and ζa(t) accordingly

=r -  2 [ (t)] = 2pv  v = var( (t)) = v2  E[ (t)]? = ? , -show that the parameters v and p obtained by solving the above pair of equations are found to be

U = p= - 1+  2 2 2 +   (-) '1 + (r - g)2. 212

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