Which of the following statements is valid?
A)It is not possible to build a recombining binomial tree if volatility is changing over time.
B)A recombining binomial tree with $n$
Periods has
$n$
Nodes at the end of the last period on the tree.
C)A non-recombining binomial tree with $n$
Periods has
$n ^ { 2 }$
Nodes at the end of the last period on the tree.
D)None of the above.

Question

Which of the following statements is valid?
A)It is not possible to build a recombining binomial tree if volatility is changing over time.
B)A recombining binomial tree with $n$
Periods has
 $n$
Nodes at the end of the last period on the tree.
C)A non-recombining binomial tree with $n$
Periods has
 $n ^ { 2 }$
Nodes at the end of the last period on the tree.
D)None of the above.

Quizplus · Accepted Answer

A recombining binomial tree, even with changing volatility, can still recombine, meaning statement A is incorrect. For a recombining binomial tree with $n$ periods, the number of nodes at the end is $n+1$, not $n$, making statement B incorrect. A non-recombining binomial tree with $n$ periods has $2^n$ nodes at the end, not $n^2$, making statement C incorrect. Therefore, D is the correct choice as all other statements are invalid.

Which of the Following Statements Is Valid? A)It Is Not nnn

Which of the Following Statements Is Valid?
A)It Is Not $n$