Question: A . Consider the 3-period binomial model with S0 = 200, u = 2, d = 1 2 and r = 1 4 . Find

A . Consider the 3-period binomial model with S0 = 200, u = 2, d = 1 2 and r = 1 4 . Find the current price and compute the number of shares of stock which should be held by the replicating portfolio at time 0, 1 and 2 for: (a) Lookback call option with a strike price of $100 that pays off (at time three)

V3 = (max 0

C. Lookback put option with a strike price of $300 that pays off (at time three)

V3 = (300- min 0

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