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Be able to explain the Binomial model for dates, t = 0,1,2,3. Be able to explain how it can be used to value a European

Be able to explain the Binomial model for dates, t = 0,1,2,3. Be able to explain how it can be used to value a European call option on a stock. Explain the role of the Arrow-Debreu security prices sometimes called Risk Neutral prices. Also be able to give the intuition about how the Binomial pricing model converges to the Black-Scholes formula.

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