define ending price of stock
define beginning price of stock
define range of values
define domain of values
Answer is Right!
Answer is Wrong!
The correct answer is: B. define beginning price of stock
The binomial option pricing model is a mathematical model that is used to price options. It is based on the assumption that the price of the underlying asset can take on only two possible values at the end of the option’s life. The first step in the binomial option pricing model is to define the beginning price of the stock. This is the price of the stock at the start of the option’s life.
The other options are incorrect because:
- Option A is incorrect because the ending price of the stock is not known at the start of the option’s life.
- Option C is incorrect because the range of values that the stock price can take on is not known at the start of the option’s life.
- Option D is incorrect because the domain of values that the stock price can take on is not known at the start of the option’s life.