4. Consider the one-period binomial model, and let V1 S1- That is, the derivative security pays...

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4. Consider the one-period binomial model, and let V1 S1- That is, the derivative security pays the stock price at time t-1. Find the time t = 0 no-arbitrage price of the derivative, Vo

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Answer 1

Answer #1

If the derivative security pays the stock price at time t=1 in the case of one-period binomial model the at time t=0 the price of the derivative, V₀ will be same as S_{0, where there
is no arbitrage.}

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