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Consider a binominal model for a futures contract. You are given: I) Each period is 1 year. II) The price of a one-year at the
Consider a binominal model for a futures contract. You are given:
I) Each period is 1 year.
II) The price of a one-year at the money call option on the futures contract is 6.3415.
III) The risk-neutral probability of an up move is 1/3
IV) The initial futures price is 100
V) The continuously compounded risk-free interest rate is 5%
Calculate d.
(Note: resolve this contract as a call option, treating the initial futures price as the strike and the final futures price as the final price)
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