Risk-neutral up probability
In a one-step binomial model with up factor , down factor , and gross risk-free return , what is the risk-neutral probability of an up move? (to 2 decimals)
Show hints (2)+
- p = (R − d) / (u − d).
- R is the gross (1+r) risk-free return.
Answer
Reveal answer →Final answer
0.5 (± 0.01)
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