I have discussion with my colleague on why a general assumption $$ud=1$$ in binomial tree option pricing model would be necessary? I take it a simplification of the problem, otherwise, there will be ...
I have a question regarding the pricing of convertible bond. If I value the convertible bond with two different underlying assets, how can I incorporate two volatility and the correlation in the ...
I'm new to quantitative finance, so I'm confused with the so-called path dependency in binomial tree model. Originally I thought the path dependency exists because in binomial tree model, we will ...
The annual interest rate is 5.3% and the annualized volatility of a non-dividend paying stock over the next six months will be 12.5% (annualized). i) Construct binomial trees of 5, 10 and 30 periods ...
How can I use a binomial tree to price a European option that's based on a portfolio of equity products? I have volatility and correlation matrix of all underlying products? Looking for a formula ...