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jumps

  1. Nicole Seaman

    YouTube T4-07: Binomial option pricing model: up/down jumps based on volatility

    Instead of arbitrarily selecting the up (u) and down (d) jumps in the binomial, we can "match them to a volatility input assumption, σ. The correct values are given by u = exp[σ*sqrt(Δt)] and d = 1/u; notice that the exponent is just apply the Square Root Rule (SRR) of scaling the per annum...
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