13.7 The 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 ou+(1-p)Sod=Soe(r-g) so that lqr Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 13.7 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 p e d u d r q T = − − ( − )