For a stock paying security with dividend yield q is the risk neutral probability measure: (exp (r - q)*t - u) / (u - d) : appears to be indicated by Hull. or (exp (r*t) - u) / (u - d) : appears to be indicated by Q&A Bank 4.5 Any help - much appreciated.
take a look at the formula book - that is the correct one! (i.e. q is handled in the definition of u and d)
I would guess that the Q&A bank question was for a non-dividend paying security, hence the non-appearance of q... Now of course the £1,200 (in my case) is, will Binomial Model actually come up?? Any other topic guesses to come up or not come up? If past performance were a guide to the future, I'd suggest we'll be drawing some charts of the Greeks...
past performance is never a guide to the future for actuarial exams... i hope it's a nicer paper than last sept, that looked absolutely evil compared to every other CID/ST6 paper in existance.
[tinged with bitterness having failed in Sept] I suppose the only difference this time is they can claim that Hull stuff is fair game (unlike in Sept) following the note on the Actuarial website. Apart from that, nothing changed including the examiners probably. I'd be tempted to widen your quote as my take is that both the ST6 papers so far have been fairly evil and had little resemblance to CiD albeit that some stuff moved in and out of the syllabus.
