makros5

April 25th 2008, 06:58 PM

Can somebody please explain me in the solution how did he get the rh = .005? The question says it is 3-period binomial tree and 9-month option. In that case isn't h = 1/3, if so, rh should be 0.00667. Can someone please confirm.

Thanks

zmkramer

April 26th 2008, 01:52 PM

Can somebody please explain me in the solution how did he get the rh = .005? The question says it is 3-period binomial tree and 9-month option. In that case isn't h = 1/3, if so, rh should be 0.00667. Can someone please confirm.

Thanks

don't forget the fact that its a 9 month option. which expressed as a fraction of a year would be .75 so multiply .00667 by .75

lee_onion

April 29th 2008, 11:41 PM

don't forget the fact that its a 9 month option. which expressed as a fraction of a year would be .75 so multiply .00667 by .75

Agree with zmkramer. Here h = 0.25, so rh = 0.005

Powered by vBulletin® Version 4.2.2 Copyright © 2019 vBulletin Solutions, Inc. All rights reserved.