Question: In Example 8.1, suppose that u = 1.2, d = u1, R = 1.1, = 0.1, and S = 5. Calculate the premiums of

In Example 8.1, suppose that u = 1.2, d = u−1, R = 1.1,

α = 0.1, and S = 5. Calculate the premiums of European call and put options with strike price K = 5 and maturity T = 2. Does the put–call parity hold even in this case?

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