Question
Problem 2. The Cox Ross and Rubinstein Tree Model (10 points) An Exchange rate has a volatility of 12%. The domestic and foreign risk-free interest
Problem 2. The Cox Ross and Rubinstein Tree Model (10 points)
An Exchange rate has a volatility of 12%. The domestic and foreign risk-free interest rates are 6% and 4%, respectively. The time step on a binomial tree (Dt) is three months.
What are the p, u and d parameters for a Cox, Ross, and Rubinstein model?
p = u =
d =
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International Finance Transactions Policy And Regulation
Authors: Hal Scott, Anna Gelpern
20th Edition
1609303164, 978-1609303167
