110 In the binomial model, the difference between the up and down factors best represents the:
A volatility of the underlying.
B moneyness of an option.
C pseudo probability.
A is correct. The volatility of the underlying is captured in the binomial model by the difference between the up and down factors.
B is incorrect. The moneyness of an option is given by the difference between price of the underlying and exercise price.
C is incorrect. The difference between the up and down factors is only one part (the denominator) of the formula for the pseudo probabilities.
老师,pseudo probability是什麽呢?在哪里出现过?谢谢