1. 

   barney Member

   For a one-period binomial tree, the value of an option is:
   
   exp(-r)*{(q.cu + (1-q).cd}
   
   If there's just one period and say this period is six months but r is given as 4% per annum, what do you use in the formula for exp(-r)???
   Do you use exp(-0.02)?
   
   Thanks.

    

   barney, Feb 19, 2011

   #1
2. 

   didster Member

   yes

    

   didster, Feb 21, 2011

   #2

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