Question: 2. Consider a three-period binomial model, with a stock S with initial price So = 4, u = 2, d = 0.5, At = 1,

2. Consider a three-period binomial model, with a stock S with

2. Consider a three-period binomial model, with a stock S with initial price So = 4, u = 2, d = 0.5, At = 1, and a money market account with constant interest rate r so that e = 1.25. The payoff of a European-style lookback option with maturity T =3 and K = 2 is: P= max Sn - K. 0

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