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Unformatted text preview: rt where r is the rate of growth per period (it may be zero, or even negative) The volatility around this mean The object of this exercise is to make sure that you understand the process of developing a lattice projection. VARG Curve and Multiple Criteria If you have not already drawn a VARG curve and set up a table of multiple criteria for your case, (as part of AP4) Do so for this exercise! Software aids: On the web, under Course Material / Spreadsheets you will find several Excel files that can be useful: binomial lattice.xls allows you to try out various (u, d, p) combinations to see what you can get best fit to data.xls gives you a way to obtain the (v and sigma) and thus the (u, d, p) that best fit time series of data binomial fitting to assumed values.xls provides a way to get (u, d, p) to some minimal technology (or other) projection. 1...
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- Fall '03