Question: 2. Option pricing, binomial model The NOK/GBP exchange rate is 11.23, the p.a. six-month interest rate in Norway is 1.41% and the p.a. six-month interest

2. Option pricing, binomial model The NOK/GBP exchange rate is 11.23,

2. Option pricing, binomial model The NOK/GBP exchange rate is 11.23, the p.a. six-month interest rate in Norway is 1.41% and the p.a. six-month interest rate in Great Britain is 0.99%.* During each of the next two three-months periods the exchange rate may either increase or decrease by 0.25 NOK/GBP. Use the binomial model to estimate the price of a six-months European call option on GBP with strike at 11.20 NOK/GBP

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