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binomial model, branch, lower, paths

A branching tree for the binomial model:

A. should capture all possible futures paths for the asset.
B. has a move down followed by a move up on a subsequent branch to end at the same value as the reverse path.
C. has a move down followed by a move up on a subsequent branch to end at a lower value than a move up then a move down.
D. Both A and C.
E. Both A and B.

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A branching tree for the binomial model:

A. should capture all possible futures paths for the asset.
B. has a move down followed by a move up on a subsequent branch to end at the same value as the ...

Solution Summary

Binomial model is discussed in great detail in this solution.

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