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PRMIA Exam 8007 Topic 1 Question 64 Discussion
Actual exam question for
PRMIA's
Mathematical Foundations of Risk Measurement ? 2015 Edition exam
Question #: 64
Topic #: 1
[All Mathematical Foundations of Risk Measurement ? 2015 Edition Questions]
Topic #: 1
In a binomial tree lattice, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of . The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. The risk neutral probability for an up move is:
Suggested Answer:
D
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