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Probability of an up move in a risk-neutral world

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Reference no: EM133035722

Problem: A Cox-Ross-Rubinstein binomial tree is used to value an option on the Dow Jones Industrial Average (DJIA) index. The dividend yield is 2.2% per annum, the index volatility is 22% per annum, the time step is 2 months, and the risk-free interest rate is 3.1% per annum. What is the probability (p) of an up move in a risk-neutral world?

Reference no: EM133035722

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