Binomial Option Pricing Professor P. A. Spindt A simple example A stock is currently priced at $40 per share. In 1 month, the stock price may go up by 25%, or go down by 12.5%. A simple example Stock price dynamics: t = now t = now + 1 month up state $40x(1+.25) = $50 $40

Binomial Option Pricing

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