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Homework answers / question archive / The current spot price of an asset is S0 = $50
The current spot price of an asset is S0 = $50.
Each month the price could increase to 1.10 times its current value (u=1.10) , or it could decrease to (1/1.10) times its current value (d=1/1.10)
The interest rate is 25 basis points per month.
Q1. What is the risk neutral probability and the forward price F2?
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