Consider a 1 step binomial model of security with s0 120, Ask an Expert

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Consider a 1 step binomial model of security with S(0) = 120 and r = .05 and P(S(1) = 120) = 1/3 and P(S(1) = 132) = 2/3. Can you find the Risk neutral measure? what is the transformation function τ (Radon-Nikodym Derivative/Girsonov transformation) of the original probability to the risk neutral measure?

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Category:- Financial Management
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