Hi all, I am currently studying the Chapter 16 and a have a few questions 1. In this chapter we are trying to find the price of the derivative in continuous time. Right? So we are using these 5 steps in order to evaluate the price of the derivative. If this is true, why does it say in the summary that these 5 steps are used for the proof of the binomial model? I mean that the binomial model is used for the pricing of a derivative which has a discrete state space in a discrete time 2. What is the difference between the real world probability (p) and the risk-neutral probability? 3. The martingale representation theorem is used for the martingale of q probability? 4. Are there any exercises that will require from us to perform these 5 steps or they are just shown as equivalent steps of the binomial model? In overall, i can't really understand the use of this chapter Your prompt response will be highly appreciated. Thanks,
