In the binomial tree with a given up and down movement of u and d with...

 

Transcribed Image Text:

In the binomial tree with a given up and down movement of u and d with probabilities p_u and p_d, respectively, we calculated the probability that the stock will move up exactly k out of n times as: P(Sn=Soukan-k)= | >-(2) n Σ k=0 k Which of the following is true (and why is this important)? n O n-k<0 Σ (1) Pr k=0\ k n k=0 n n (1) pup-k<1 n kr Pu Pd n k=0 k kn_n-k=1 "Pd kn_n-k> 1 Pu Pd n-k In the binomial tree with a given up and down movement of u and d with probabilities p_u and p_d, respectively, we calculated the probability that the stock will move up exactly k out of n times as: P(Sn=Soukan-k)= | >-(2) n Σ k=0 k Which of the following is true (and why is this important)? n O n-k<0 Σ (1) Pr k=0\ k n k=0 n n (1) pup-k<1 n kr Pu Pd n k=0 k kn_n-k=1 "Pd kn_n-k> 1 Pu Pd n-k

Answer rating: 100% (QA)

Answer is n KO K 2 P DK 1 This is because axiom 2 of ... View the full answer