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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
- MIT OpenCourseWare, Massachusetts Institute of Technology, Trend estimation