Assignment: One step binomial model Suppose that stock price moves up by 5% (u=1.05) and d= 1/u. The current stock price is $50. Dividend is zero. Compute the current value of a European call option with the strike price of $51 in three months using both the replicating portfolio valuation method and the risk-neutral valuation method. The risk free rate is APR 5% with continuous compounding (or, 5% per annum). Draw the dynamics of stock price and option price using the one step binomial tree. " Draw the dynamics of the replicating portfolio valuation using the one step binomial tree. Present value of debt (B), value of option delta (A ), and the risk-neutral probability (p) Solve for the option price using replicating portfolio valuation approach and risk-neutral valuation approach, respectively. Only handwritten submission is accepted. Any type of plagiarism leads to zero grade