The chapter discusses an alternative to the Cox,Ross,Rubinstein tree.In this alternative,which of the following are true:
A) The relationship between u and d is: u=1/d
B) The relationship between u and d is: u-1=1-d
C) The probabilities on the tree are all 0.5
D) None of the above

Question

Quizplus · Accepted Answer

Instead of using a degree of freedom to set u=1/d (as is done in CRR),the alternative method uses a degree of freedom to set both the up and down probabilities to 0.5.

The Chapter Discusses an Alternative to the Cox,Ross,Rubinstein Tree