Intro
Binomial Model
Fair Price
Arbitrage
Replicating a portfolio
Basic Concepts
Striking Price K
Call Option
Put Option
Forward Contract
Long, Short Position
Buy, Sell
Lend, Borrow
Variables and Parameters
t
X_n: ?
\Delta_n
B_n
S_n
V_n
K
u
d
r
(1+r)
\frac{1}{1+r}
p
\tilde{p}
q
\tilde{q}
Evolution
Backwards
No Arbitrage Assumption
0 < d < 1+r < u
Chap 2 # Convex Function # Jensen’s Inequality