When we apply the binomial option pricing model to calculate an option value, one approach is to use risk neutral valuation, where we calculate the risk neutral probability.

We have constructed a 6 period binomial tree to price a 12 month put option. The tree parameters are u =1.085, d = 0.922, r = 0.05.

The risk neutral probability correct to three decimal places is:

Select one:

0.793

0.530

0.633

0.634