For a one-step binomial model the two possible expiry values of some derivative are $0...
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For a one-step binomial model the two possible expiry values of some derivative are $0 when the underlying is worth $50, and $5 when the underlying is worth $10. Over the life of the derivative the return on an investment is R=1.25. Which of the following could be true? The derivative is a put with H0=5 and H1=0.125. The derivative is a call with H0=5 and H1=0.125. The derivative is a put with H0=5 and H1=0.125. The derivative is a call with H0=5 and H1=0.125
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