Question: 1. Consider the single period binomial model. Suppose r=0.03, u = 1.1, d=1/1.1 and So = 25. Consider a Eurpoean call option on the stock

1. Consider the single period binomial model. Suppose r=0.03, u =

1. Consider the single period binomial model. Suppose r=0.03, u = 1.1, d=1/1.1 and So = 25. Consider a Eurpoean call option on the stock with strike price K = 26. (a) Compute the equivalent martingale measure (qu, qa). (b) Find the no-arbitrage price of the claim at time 0. C) Find the replicating portfolio. 1. Consider the single period binomial model. Suppose r=0.03, u = 1.1, d=1/1.1 and So = 25. Consider a Eurpoean call option on the stock with strike price K = 26. (a) Compute the equivalent martingale measure (qu, qa). (b) Find the no-arbitrage price of the claim at time 0. C) Find the replicating portfolio

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