Question: Item 1- Stock Binary Tree Pricing Assume that the underlying asset is a non-dividend paying stock with a current market price of $100, a volatility

Item 1- Stock Binary Tree Pricing

Assume that the underlying asset is a non-dividend paying stock with a current market price of $100, a volatility of 20% a year, and a risk-free continuous compound annual interest rate of 5%. Use the binary tree pricing method to calculate the value of a 2-year American put option and a European put option with a strike price of $110 and give the Delta neutral strategy to hedge the risk of the European put option, including the number of stocks to be bought and sold at different points and the hedging profit and loss of each path at the end of the period. Two-step binary tree, which you can do in Excel.

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