- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 11. Binomial Valuation of Options

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**CFA Practice Question**

According to the binomial model, the value of a put option is NOT determined by ______.

A. the volatility of the underlying

B. the probabilities of the up and down moves

C. the risk-free rate

**Explanation:**The actual probabilities of the up and down moves are irrelevant to pricing options. The risk-free rate and underlying volatility are highly relevant.

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**User Contributed Comments**
1

User |
Comment |
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nmech1984 |
I presume synthetic probabilities concern. |