Exampleƒ 225

Example Take any q

1

such that the risk-neutral probabilities are between 0 and

1. Two possible choices for the risk

-neutral measures would be (0,1,0)

or (2/3,0,1/3).

S =100

S1=120 S2=110 S3=90

(

)

()

1

2

2

1

2

1

~

3 2

1

~

(^1).
1
90
~
~
1
110
~
120
~
100
1
q
q
q
q
q
q
S r
E
S
T
q
⋅
−

⇒
⋅ − − + ⋅ + ⋅ =

• =
  Derivative securities: Options - Binomial asset pricing model