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.

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

Transcribed Image Text:

s=121 S"=110 P"=? s"=99 P"=e So=100 Po=? 0) =90 S"=90 1-p P0=? S"=81 P"=24