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

Quizplus · Accepted Answer

A recombining binomial tree can be built even if volatility changes over time by adjusting the tree structure accordingly. A recombining binomial tree with $n$ periods has $n+1$ nodes at the end of the last period, not $n$. A non-recombining binomial tree with $n$ periods has $2^n$ nodes at the end, not $n^2$.

Which of the Following Statements Is Valid? A) It Is nnn

Which of the Following Statements Is Valid?
A) It Is $n$