What are the u,the up state multiplier,and d,the down state multiplier,if there are monthly intervals and the standard deviation is .38?
A) 1.1159; .8961
B) .0317; 31.5789
C) .0317; .9683
D) .2193; .7807
E) None of these.

Question

Quizplus · Accepted Answer

The up state multiplier (u) and down state multiplier (d) can be calculated using the formulas u = e^(σ√Δt) and d = e^(-σ√Δt), where σ is the standard deviation and Δt is the time interval in years. For monthly intervals, Δt = 1/12. Plugging in the given standard deviation (σ = 0.38), we find u ≈ 1.1159 and d ≈ 0.8961.

What Are the U,the Up State Multiplier,and D,the Down State