12.7 TThe Binomial model (continued In a risk-neutral world the stock price grows at r-g rather than at r when there is a dividend yield at rate q The probability, p, of an up movement must therefore satisfy pOut(I-p)Sod=spe(r-g)r so that q)7 d Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal UniversityOptions, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 12.7 The Binomial Model (continued) • In a risk-neutral world the stock price grows at r-q rather than at r when there is a dividend yield at rate q • The probability, p, of an up movement must therefore satisfy pS0u+(1-p)S0d=S0 e (r-q)T so that ( ) r T q e d p u d − − = −