in the binomial model, the difference between the up and down factors best represents the: volatility of the underlying. moneyness

in the binomial model, the difference between the up and down factors best represents the: volatility of the underlying. moneyness of an option. pseudo probability.

1 thought on “in the binomial model, the difference between the up and down factors best represents the: volatility of the underlying. moneyness”

  1. Option(a) is correct. The volatility of the underlying is captured in the binomial model by the difference between the up and down factors.

    What is Binomial Model?

    A binomial model describes the number of survivors, x, in n independent tests. Predetermined tests, statistically independent results for every test, and a constant survival probability throughout the tests are requirements. Based on the binomial distribution model, we can calculate the probability of observing a specified number of “successes” in the case of repeated processes (for example, in a set of patients).
    To Learn more about binomial model:
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