ASM chapter 4 questions
I'm looking at the first few questions in chapter 4. The problems say they are based on future pricing, but the solution doesn't use the u = e^(sigma * sqrt(h))
Instead, it uses u = e^((r-delta)*h + sigma * sqrt(h))
also, just at a quick glance, the p formulas are not using the 1-d/(u-d) as they should if the binomial tree is based on forward pricing. I believe you can see that in question 4.4. Can anyone explain why? Or are these all errors?
Originally Posted by win diesel
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