Page 7, Problem 1.4, Answers to Chapter 13 - Binomial Trees (Bionic Turtle)

[Dr. Jayanthi Sankaran]

Hi David,

In your answer to problem 1.4 as referenced above, there seems to be an extra node in the downward movement in the Binomial tree. Just thought I would bring it to your attention.

Thanks!
Jayanthi

 

[David Harper CFA FRM]

Hi @Jayanthi Sankaran Those cells are showing the two values at node[1,0]; i.e., discounted value versus intrinsic value such that max[1.90, 1.12] is assumed for the node's value. But it's not labelled so it does appear to be an extra cell! Thanks,

 

[Dr. Jayanthi Sankaran]

Thanks, David - appreciate it!

Jayanthi