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A one-period model where the initial stock price is S has equal probab.pdf

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A one-period model where the initial stock price is S has equal probability of going up to S U or down to S D at time T where U = 1/ D and U > 1 Assuming rates are zero show that there must exist an arbitrage opportunity..

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A one-period model where the initial stock price is S has equal probability of going up to S U or down to S D at time T where U = 1/ D and U > 1 Assuming rates are zero show that there must exist an arbitrage opportunity.

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A one-period model where the initial stock price is S has equal probab.pdf

  • 1. A one-period model where the initial stock price is S has equal probability of going up to S U or down to S D at time T where U = 1/ D and U > 1 Assuming rates are zero show that there must exist an arbitrage opportunity.