Question: 1. Let 8(0) 2 100, R = 0.05, U = 0.2, D = 0.2, and N = 3, and consider the payoff of following European

1. Let 8(0) 2 100, R = 0.05, U = 0.2, D = 0.2, and N = 3, and consider the payoff of following European buttery spread: 3-? (a) You can construct this spread by buying and/ or selling European call options. List the call options needed to replicate the buttery spread. (b) Price the buttery spread by taking the discounted riskneutral ex- pected value off the option payoff. (c) Price the four call options from part (a) using your program. What is the sum of the call options? (remember to adjust the sign based on whether you are buying or selling) (d) Draw the gain of buttery spread

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