chapter binomial model problem 13.14 of VaR

[Urvil Khona14]

Hey David,
I've a question for the chapter binomial model problem 13.14 of VaR
The question is
A stock price is currently $25. It is known that at the end of two months it will be either $23 or
$27. The risk-free interest rate is 10% per annum with continuous compounding. Suppose ST is
the stock price at the end of two months. What is the value of a derivative that pays off

So I wanted to know how did you find the values of u in the question because I was not able to find equation 13.2&13.3
Please help

 

[Nicole Seaman]

Hey David,
I've a question for the chapter binomial model problem 13.14 of VaR
The question is
A stock price is currently $25. It is known that at the end of two months it will be either $23 or
$27. The risk-free interest rate is 10% per annum with continuous compounding. Suppose ST is
the stock price at the end of two months. What is the value of a derivative that pays off

So I wanted to know how did you find the values of u in the question because I was not able to find equation 13.2&13.3
Please help

Hello @Urvil Khona14

Can you please edit your original post to include the answer options, and the answer & explanation provided? I'm not sure what the source of this question is so it is helpful to have the full information about what you are referring to. Thank you.

 

[Urvil Khona14]

This is the question and it's from bionic turtle

 

[Nicole Seaman]

This is the question and it's from bionic turtle

Hello @Urvil Khona

Thank you for the screenshot, as this helps us to see where the question originated. This is not a Bionic Turtle practice question. In previous years, we included practice questions from the John Hull book at the end of our practice question sets. This is a question written by John Hull. We no longer provide those questions in our current question sets. Bionic Turtle questions are all written by David Harper. I'm not sure where you got this from, as our practice question sets are only available to our paid members. Actually, looking at the screenshot, I can see that you retrieved this from another member who illegally shared their purchased materials, as it shows their username at the top where it clearly stated that materials are not to be shared. Unless you've previously purchased our materials under a different username.

cc: @David Harper CFA FRM

 

[Urvil Khona14]

So you won't be able to help me?

 

[Urvil Khona14]

I paid them for this please help me as my exams is in a week on 16th Jan I'm really confused please

 

[Nicole Seaman]

I paid them for this please help me as my exams is in a week on 16th Jan I'm really confused please

Hello @Urvil Khona14

Did you purchase them under a different username from our website? Your account is not showing a purchased study package. I'm happy to discuss this further through email if you prefer so we can fix any account issues if you purchased them from us.