Which of the following statements about the binomial option pricing model is not always true?
A)it can capture the effect of early exercise
B)it can accommodate a large number of possible stock prices at expiration
C)it reflects the effects of the stock price,exercise price,risk-free rate,volatility and time to expiration
D)it gives the price at which the option will trade in the market.
E)none of the above

Question

Quizplus · Accepted Answer

The binomial option pricing model gives the theoretical fair value of an option based on the underlying asset's expected price movements, but it does not give the actual market price at which the option will trade. The market price will depend on various factors such as supply and demand, liquidity, and market conditions.

Which of the Following Statements About the Binomial Option Pricing