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Binomial Model for Replicating Portfolios by Maria Registration is a document available to read on EtoBox.
What is Binomial Model for Replicating Portfolios about?
1. The document discusses using a binomial model to value a portfolio of real options, including options to abandon, extend, and contract a biofuel production project. 2. An event tree is constructed showing possible values of the underlying asset over 4 years, with annual volatility of 20% and a risk-free rate of 8%. 3. Replicating portfolios are used to calculate the value of each option at each node, accounting for flexibility. These values are folded back to determine the initial real option value.
- Author
- Maria Registration
- Language
- EN