Look at the binomial tree in Figure 12.14. Assume that the risk-free interest rate vanishes, r =

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Look at the binomial tree in Figure 12.14. Assume that the risk-free interest rate vanishes, r = 0%, and price the European plain vanilla put option by computing the hedge-portfolios ?(1)1, ?(1)1 and ?0.

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Fig. 12.14?Binomial tree for European plain vanilla put option.

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