PRMIA PRM Certification - Exam II: Mathematical Foundations of Risk Measurement 8002 Question # 9 Topic 1 Discussion

PRMIA PRM Certification - Exam II: Mathematical Foundations of Risk Measurement 8002 Question # 9 Topic 1 Discussion

8002 Exam Topic 1 Question 9 Discussion:
Question #: 9
Topic #: 1

In a binomial tree lattice, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of . The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. The risk neutral probability for an up move is:


A.

0.5290


B.

0.5292


C.

0.5286


D.

0.5288


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