archived_user
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- Dec 7, 2011
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Hi,
In CFAI book, based on the no-arbitrage approach, the call price assuming an up move has occurred at Time Step 1 is
C+ = hc+ S+ + PV1,2 (-hc+S+- + c+_ )
P+ = hp+ S+ + PV1,2 (-hc+S+++ p++)
I am wondering why the superscript (S+- and S++) aren’t the same for the call and put prices? can someone please explain?
Thanks!
In CFAI book, based on the no-arbitrage approach, the call price assuming an up move has occurred at Time Step 1 is
C+ = hc+ S+ + PV1,2 (-hc+S+- + c+_ )
P+ = hp+ S+ + PV1,2 (-hc+S+++ p++)
I am wondering why the superscript (S+- and S++) aren’t the same for the call and put prices? can someone please explain?
Thanks!