Why don't we deannualize risk free rate when calculating call option price in binomial model

CFA Level II Portfolio Management
#1

[original post removed]

#2

Suppose it’s a 60 day call option

#3

You do.

However, I don’t recall ever having seen an example of a binomial model in the CFA curriculum that didn’t use annual periods between nodes.

#4

There was a question in the PM cfai mock with a 60 day call option. Just wanted to confirm, that we have to deannualise. Bump. For my fellow 2015 L2ers

#5

Yea, that tripped me up! I felt a bit stupid afterwads, but good to get it wrong now and learn the lesson .