Question: A three-period binomial tree model, with maturity in 3 months: - The non-dividend paying stock price is $95. - The strike price is $100. -

A three-period binomial tree model, with maturity in 3 months: -

A three-period binomial tree model, with maturity in 3 months: - The non-dividend paying stock price is $95. - The strike price is $100. - The continuously compounded risk-free interest rate is 0.2% per month. - Stock price either increases by 20% or decreases by 10% per month. (a) Calculate the risk-neutral probability. (b) Calculate the price of this European call option. (3 marks) (12 marks) (c) Calculate the price of this European put option

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