Question: Consider a 7'-period Binomial model. Define S; = S,/ B,, forte {0, 1, ..., T) ({S/ } is called the discounted stock process. Show that

Consider a 7'-period Binomial model. Define S; = S,/ B,, forte {0, 1, ..., T) ({S/ } is called the discounted stock process. Show that EP [S; | F 1] = S;_,forte {1, 2, ... T} where p* = (1 + r - d)/(u - d) denotes the risk-neutral probability

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