A Brief DPL Tutorial

♦ Input the formula for p = [exp(r*t)-d]/(u-d)
♦ Click Enter and OK
♦ Click on the Chance Node icon to create a Chance Node.
♦ Name this node “Yr1”
♦ Modify the outcomes so
♦ Click on the Data tab
♦ Input “p” as the probability
♦ Input $100*u for the “Up” outcome
♦ Input $100*d for the “Down” outcome
♦ Click OK
that we have only two states: “Up” and “Down”
Note that there is no
need to enter the down probability, as the model assumes it is (1-p)
automatically.
We must now create 5 chance nodes that are very similar. The easiest way
to do this is to make a copy of this node and then edit in the modifications. 2
♦ Click on the “Yr1” node
♦ Click “Edit / Copy” and then “Edit / Paste”. A new chance node will appear
♦ Change the name of the new
chance node to “ Yr2”
♦ In the Data tab, replace “100*u” with “Yr1*u” for the “Up” outcome
♦ Replace “100*d” with “Yr1*d” for the “Down” outcome
♦ Click on the “Yr2” node
♦ Click “Edit / Copy” and then “Edit / Paste”. A new chance node will appear
♦ Change the name of the new
chance node to “ Yr3”
♦ In the Data tab, replace “Yr1*u” with “Yr2*u” for the “Up” outcome
♦ Replace “Yr1*d” with “Yr2*d” for the “Down” outcome
Repeat for Chance Nodes “Yr4” and “Yr5”.
In the
Decision Tree Pane:
♦ Click anywhere inside
the pane to make this the active pane
♦ All 5 Chance Nodes are already in place.
♦ Click on any branch of the “Yr1” node. The Get/Pay menu po
♦ Delete the formula there and leave it blank
ps up.
♦ Click OK
♦ Repeat for all chance nodes of the tree except
for the last one (Yr5).
2 Unfortunately this does not work with Student Version 4.0, only with the Full Version
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