Financial Risk Manager Part 1
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Brandon, FRM, is tuning the binomial tree option pricing model used for pricing a European call option. After changing the length of time step, Δt, from 1/2 to 1/12, what will be the impact on the model?
Brandon, FRM, is tuning the binomial tree option pricing model used for pricing a European call option. After changing the length of time step, Δt, from 1/2 to 1/12, what will be the impact on the model?
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A
The option value as a model output will remain the same after reducing the length of time step.
B
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