Exam: CH 12 Binomial method Flashcards by Harry Evans

Q

What is a risk neutral world?

A

is a market in which all individuals are indifferent to risk. Investors require
no compensation for risk. All stocks gain at the risk-free rate

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Q

What is e Delta, ∆?

A

the ratio of the change in the price of the stock option to the change in the
price of the underlying stock

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