Question: Consider the two-period binomial model with u D 3=2, d D 2=3, interest rate r D 1=6 and suppose S0 D 45. What is the

Consider the two-period binomial model with u D 3=2, d D 2=3, interest rate r D 1=6 and suppose S0 D 45. What is the value of the European call option with strike price 50, i.e., the option with payoff .50 S2/C. Find the stock holdings 0,

1.H/, and 1.T/ need to replicate the option exactly.

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