Business, 23.03.2020 20:32, krlx

Footnote 2 of the main textbook states that you can think of path dependence in the context of a binomial pricing model. Assume today's stock price is $35, the continuously compounded risk-free interest rate is 6%, the time to expiration is 9 months, the continuously compounded dividend yield is 2%, and the stock's annualized standard deviation is 30%.

Construct the three-period binomial tree for the stock price.

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Footnote 2 of the main textbook states that you can think of path dependence in the context of a bin...