Question: 3. (20 points) Consider the binomial tree model. Suppose the stock price at time zero is S0, and the stock does not pay dividends. The

3. (20 points) Consider the binomial tree model. Suppose the stock price at time zero is S0, and the stock does not pay dividends. The risk free rate is r and the time step is t. Consider an exotic option with present time 0 and the maturity at time T = Nt and the payoff at the maturity is (S1) 2 + (S2) 2 + + (SN ) 2 . What is the time 0 price of this option?

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