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Exercise 4.33 (Options pricing) Consider a market that operates for a single period, and which involves three assets: a stock, a bond, and an option.
Exercise 4.33 (Options pricing) Consider a market that operates for a single period, and which involves three assets: a stock, a bond, and an option. Let S be the price of the stock, in the beginning of the period. Its price 5 at the end of the period is random and is assumed to be equal to either Su, with probability B, or Sd, with probability 1 - B. Here u and d are scalars that satisfy d
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