Question
The volatility (sigma) of a stock is 49% per annum. We will model stock-price movements using a Binomial tree, where each branch of the tree
The volatility (sigma) of a stock is 49% per annum. We will model stock-price movements using a Binomial tree, where each branch of the tree has a step length (delta t) of 5 months.
Calculate the proportion down movement (d) that applies to each branch of the tree.
Your answer should have at least two decimal places.
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
