Principles of Corporate Finance

Probability Up = p = (a - d) Prob Down = 1 - p
(u - d)

a = er∆∆^ t d =e-σ σ [∆ ∆ t].5 u =eσσ^ [∆ ∆ t].5

∆∆t = time intervals as % of year

Binomial Pricing