In order for a binomial option price to approach the Black Scholes price, ________.
A) the number of subintervals must increase substantially
B) the volatility must be low
C) the probability of each subinterval needs to be similar to the stock's standard deviation
D) the interest rate needs to increase

Question

Quizplus · Accepted Answer

The binomial option pricing model approaches the Black Scholes price as the number of subintervals increases, allowing for a more continuous approximation of price movements.

In Order for a Binomial Option Price to Approach the Black