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1. Conditional expectation Consider the following filtration (P+)E1, where r = 0: W1 W2 S(0,w) S(1,w) S(2,w) , w 10 14 1
Posted: Wed Mar 09, 2022 8:44 am
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- 1 Conditional Expectation Consider The Following Filtration P E1 Where R 0 W1 W2 S 0 W S 1 W S 2 W W 10 14 1 1 (56.17 KiB) Viewed 35 times
1. Conditional expectation Consider the following filtration (P+)E1, where r = 0: W1 W2 S(0,w) S(1,w) S(2,w) , w 10 14 15 10 14 11 10 9 11 10 9 5 W3 W4 (i) Calculate the conditional probabilities for each edge of the tree. (ii) Deduce the probability associated with each path wi (iii) Show that for all paths wi: Eq[S(2)|P1](Wi) = Sı(wi) = and calculate the value of a European call option struck 8.