Prove that a one-period binomial model is free of arbitrage if and only if  d < r+1 < u u = S1(H)/S0 , d=S1(T)/S0

Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter5: Inverse, Exponential, And Logarithmic Functions
Section5.3: The Natural Exponential Function
Problem 57E
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Prove that a one-period binomial model is free of arbitrage

if and only if  d < r+1 < u

u = S1(H)/S0 , d=S1(T)/S0

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