be specific with your explanation...otherwise downvote by 10 students

Consider a single time step of length dt. We know the asset price So at the beginning of the time step; the price Si at the end of the period is a random variable. The simplest model we may think of specifies only two possible values, accounting, e.g., for the possibility of an increase and a decrease in the stock price. To be specific, let us consider figure 2.19. We start with a price So; at the next time instant we assume that the price may take either value Sou or Syd, where d