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Read an original all-rising record
Current price is 100, terminal states are 101 and 130, and the period factor is 1.05. Both terminal prices exceed today’s 100, but 105 lies between them, so the interior pricing-weight equation remains compatible.
Solve with the actual lower price
Higher-state weight is (105−101)/(130−101)=4/29≈13.793103%. The lower-state weight is 25/29. Calling the lower branch down does not require its terminal price to be below 100.
| Object | Value |
|---|---|
| Current | 100 |
| Lower terminal | 101 |
| Higher terminal | 130 |
| Risk-free grown current | 105 |
Avoid inserting a negative return by convention
Changing 101 to 99 merely to make a down label sound familiar changes the supplied model. Retain the input prices and their order. A gross-return representation would use factors 1.01 and 1.30.
Keep compatibility separate from likelihood
This is a hypothetical pricing setup. It does not estimate the probability of an all-rising real market or establish an investment forecast.