Example 3.1 Consider a market that can follow just two scenarios, boom or recession, de- noted by wi and W2, respectively. The current share price of a certain stock is $10, which may rise to $12 after one year if there is a boom or come down to $7 in the case of recession. In these circumstances S2 = {W1,w2} and, putting T= 1, we have Scenario S(0) S(1) wi (boom) 10 12 w2 (recession) 10 7 = Example 3.2 Suppose that there are three possible market scenarios, N = {W1, W2, W3}, the w1 stock prices taking the following values over two time steps: = 1 Scenario S(0) S(1) S(2) 55 58 60 55 58 52 55 52 53 2 W3 Example 3.1 Consider a market that can follow just two scenarios, boom or recession, de- noted by wi and W2, respectively. The current share price of a certain stock is $10, which may rise to $12 after one year if there is a boom or come down to $7 in the case of recession. In these circumstances S2 = {W1,w2} and, putting T= 1, we have Scenario S(0) S(1) wi (boom) 10 12 w2 (recession) 10 7 = Example 3.2 Suppose that there are three possible market scenarios, N = {W1, W2, W3}, the w1 stock prices taking the following values over two time steps: = 1 Scenario S(0) S(1) S(2) 55 58 60 55 58 52 55 52 53 2 W3