文稿分析成果damianov.pptxVIP

ECON41415 – Derivative MarketsTopic 7. Binomial trees;Learning Outcomes;Binomial Trees;Binomial trees can be used to value options using both no-arbitrage arguments and a principle known as risk-neutral valuation.;A One-Step Binomial Model and a No-Arbitrage Argument;6;It turns out that a relatively simple argument can be used to price the option in this example. The only assumption needed is that arbitrage opportunities do not exist. We set up a portfolio of the stock and the option in such a way that there is no uncertainty about the value of the portfolio at the end of the 3 months. We the