DERIV - Valuing a Derivative Using a One-Period Binomial Model

Jul 7, 2025 · 14 min · Season 7 · Episode 10 · 14.5 MB

0:00-14:54

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Construct a simple up/down binomial tree to price a European call. Learn risk-neutralprobabilities, replicate pay-offs with ∆-hedged portfolios, and generalise theframework for any derivative where pay-off depends on one period of pricemovement.