Illustrates an example of binomial model as complete market
Illustrates an example of binomial model as complete market?
Expert
Consider, for illustration, the binomial model in that there are two states of the world at the next time step, and here are also two securities as cash and the stock. It is a complete market. Then, after two time steps here will be three possible states of the world, to assume the binomial model recombines therefore an up–down move gets you to similar place as down–up. Therefore you might think as you require three securities for a complete market. This is not the case because after the first time step you get to change the quantity of stock you are holding; it is where the dynamic part of the replication combines.
Explain maintenance of future and option margins.
Give explanation: The banks try to make short-term self-liquidating loans to businesses.
With whom Sharpe is shared Nobel Prize (1990)?
Why is dispersion trading become successful?
Define market participants in the foreign exchange market?The market participants which comprise the FX market can be categorized in five groups: international banks, non-bank dealers, bank customers, FX brokers, and central banks. Internation
Normal 0 false false
Is the Black–Scholes formula correct?
What is the Black–Scholes Equation?
What are the difference between complete market and binomial model?
Give explanation: Trade credit is free credit.
18,76,764
1957420 Asked
3,689
Active Tutors
1416658
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!