Flashcards
Binomial Trees
Cards in this deck (5)
- 1One Step Binomial Model
- 2One step features/assumptions- Option lasts for time T
- Stock price can be S_0u or S_0d - 3Riskless Portfolio- Long position in Delta shares, short position in one option
- Calculate the value of Delta which makes a riskless portfolio
- 4Riskless Portfolio - No arbitrage argument (main assumption)Allows us to determine option price as:
- 5Irrelevance of Stocks Expected Return
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- Finance Flashcards on Binomial Trees, created by Mitul Patel on 18/07/2017.
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- Mitul Patel
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