Question: Consider a binomial model with ?-02, ?-0.04 and interest rate r of 5% a year, both compounded continuously. Using T-1 maturity of one year, initial

Consider a binomial model with ?-02, ?-0.04 and interest rate r

Consider a binomial model with ?-02, ?-0.04 and interest rate r of 5% a year, both compounded continuously. Using T-1 maturity of one year, initial stock price S(0) = 100 and N 3 periods, find the premium of the American Call CA(K for K 8o. Suppose the stock moves are Up/Down/Up. Compute the replicating portfolio along that scenario. Determine u and d

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