I. Module 4 Quiz 2: Risk-Neutral Probabilities
- Due No due date
- Points 10.5
- Questions 8
- Time Limit None
- Allowed Attempts 3
Instructions
Let's continue to explore the binomial example. A stock has price 1, and pays or . The interest rate is . The states have probability and . Find
a) the contingent claim prices
b) the stochastic discount factor
c) the risk neutral probabilities.
Write out formulas for each quantity, i.e. in terms of . Calculate values based on .
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