(Difficult) Compare the replication of an option in a binomial model versus replication in a trinomial model...
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(Difficult) Compare the replication of an option in a binomial model versus replication in a trinomial model by answering the following questions:
(a) How many securities do we need to carry out replication in each model?
(b) Is the risk-neutral probability defined in each model unique?
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Heres a comparison of option replication in binomial and trinomial models a Number of securities nee...View the full answer
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