Question: (4 points) Consider a one-step binomial model. The current stock price is $20. The stock price will either go up by 20% or down by

(4 points) Consider a one-step binomial model. The current stock price

(4 points) Consider a one-step binomial model. The current stock price is $20. The stock price will either go up by 20% or down by 20% in 6 months. 6-month risk free interest rate is 1% per year with continuous compounding. Consider a 6-month power put option with payoff max(0,400 - S?). Here S is the stock price in 6 months. Construct a replication portfolio for the power put and compute the price the power put. (4 points) Consider a one-step binomial model. The current stock price is $20. The stock price will either go up by 20% or down by 20% in 6 months. 6-month risk free interest rate is 1% per year with continuous compounding. Consider a 6-month power put option with payoff max(0,400 - S?). Here S is the stock price in 6 months. Construct a replication portfolio for the power put and compute the price the power put

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