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The current spot price of an asset is S0 = $50

Finance

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?

Option 1

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