We consider a binomial model with T = 1 period, sample space = {u, d}, Fu = 1/Fd, probability of up-move p = 0.65, inter

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We Consider A Binomial Model With T 1 Period Sample Space U D Fu 1 Fd Probability Of Up Move P 0 65 Inter 1 (28.96 KiB) Viewed 32 times

We consider a binomial model with T = 1 period, sample space = {u, d}, Fu = 1/Fd, probability of up-move p = 0.65, interest rate r = 0.2 per period, and Xo = 100 Gils. We look at a derivative that pays at maturity T, where 25 Gils, if wu, = {(w) = 0 Gils, if w= d. The price of this derivative is observed on the market and it is Vo = 7 Gils. We want to calibrate the model to this observed price. What is the implied F" ? Give your answer with 2 decimal digits (e.g. 3.14).