absence of arbitrage Archives

Consider the N period binomial model. Let 1 ≤m ≤N −1 and K > 0 be given. A chooser option is a contract sold at time zero that confers on its owner the right to receive either a call or a put at time m.

By EzekielPosted on October 15, 2021October 15, 2021Posted in Math/Physic/Economic/Statistic ProblemsTagged absence of arbitrage, assignmenthelp, Binomial model, collegeessays, probability vector

1 Theoretical Problems 1. This question presents an analogy of the Capital Asset Pricing Model(CAPM) for the discrete models studied in class. Consider a complete,arbitrage free single period model with payoff matrix A, price vector z, and risk-neutral probability vector q. Assume that there is a risk-free bond and the interest rate is r. Let […]