=+8. Let the three-step binomial price model with the time step t = 1/12 have the structure

=+8. Let the three-step binomial price model with the time step Δt = 1/12 have the structure shown in Fig. 13.3. Let the continuously compounded variable interest rate be such that r0 = 12 ln 1.005 during the first period, r1 = 12 ln 1.004 during the second period and r2 = 12 ln 1.003 during the third period.