9.18 Pseudo-Probabilities However, we can solve for an implied or pseudo probability that will give us the correct answer Usng△=n= S sad in f= soa-SouA-fue-rl we obtain f=lpf +(l-pf]e Where p= u-d Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal UniversityOptions, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 9.18 Pseudo-Probabilities • However, we can solve for an implied or pseudo￾probability that will give us the correct answer • Using in f = S0D - (S0uD-fu )e -rT we obtain where S u S d f f u d 0 − 0 − D = • r T u d f pf p f − = [ + (1− ) ]e u d d p rT − − = e