Don't need answer to (b).

4. Multi Step Binomial Tree: Consider again the at-the-money European put option with one year left to maturity written on a non-dividend paying stock. As in exercise 2, today's stock price is 50 kr, the stock volatility is 30% and the risk free interest rate be 10%. (a) Construct a one-year, four-step Binomial tree for the stock and calculate today's price of the European at-the-money put. (b) Compare your valuation results of the European put in question 2. Are they the same? Why or why not? (c) The option can be replicated by a portfolio consisting of the stock and a risk-free asset. What is the replicating portfolio strategy of the put? (d) Explain how the delta should change, as the stock price increase and check if this is indeed the case in your tree. 4. Multi Step Binomial Tree: Consider again the at-the-money European put option with one year left to maturity written on a non-dividend paying stock. As in exercise 2, today's stock price is 50 kr, the stock volatility is 30% and the risk free interest rate be 10%. (a) Construct a one-year, four-step Binomial tree for the stock and calculate today's price of the European at-the-money put. (b) Compare your valuation results of the European put in question 2. Are they the same? Why or why not? (c) The option can be replicated by a portfolio consisting of the stock and a risk-free asset. What is the replicating portfolio strategy of the put? (d) Explain how the delta should change, as the stock price increase and check if this is indeed the case in your tree