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In Order for a Binomial Tree to Recombine, the Following uu

Question 3

Multiple Choice

In order for a binomial tree to recombine, the following condition is necessary and sufficient:


A) The time-step in the tree must remain constant over time.
B) The up shift factor uu and down shift factor dd must be such that u×d=1u \times d = 1 .
C) The up shift factor uu and down shift factor dd must be such that u×d=u \times d = a constant.
D) The rate of interest must be zero.

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