header bg

Question:

Which of the following is least likely a required input to a one-period binomial model for option pricing?

A An estimate of the probability of an up-move.
Explaination

A binomial model for option pricing does not require the analyst to estimate the probability of an up-move or down-move. Instead risk-neutral pseudo-probabilities are calculated using the risk-free rate and the sizes of an up-move and down-move of the underlying asset.