Multi-Period Binomial Model

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Last updated 1:13 PM on 4/10/26
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4 Terms

1
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What is a portfolio strategy?

The set of all the portfolio’s held in the nth period

2
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What is a wealth process?

Value process for a multi-period binomial model

3
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What is a self-financing strategy?

There is no extra capital into the portfolio at any time.

4
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Given an N-period binomial model, an _______ ________ is a self-financing portfolio with non-negative wealth process, zero initial investment, and eventual positive payoff.

Arbitrage possibility