- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 32. Valuation of Contingent Claims
- Subject 1. One-Period Binomial Model
CFA Practice Question
True or false?
Investors in the one-period binomial model are assumed to be risk-averse.
Correct Answer: False
Essentially, option valuation here is via application of the risk neutrality assumption over the life of the option, as the price of the underlying instrument evolves.
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