la. Consider a binomial model two securities, a volatile stock S1 and a relatively stable stock S2. S1 pays off 120 in state u and 80 in state d and costs 100 today; S2 pays off 100 in state u and 80 in state d and costs 90 today In your solution, form a replicating portfolio with quantity Ai of S and a quan- la(i) Price a derivative that pays off the greater of S1 and S2, i.e. has the payoff la(ii) Price a call on S1 with strike 110. la(iii) Price a put on S- with strike 100. la. Consider a binomial model two securities, a volatile stock S1 and a relatively stable stock S2. S1 pays off 120 in state u and 80 in state d and costs 100 today; S2 pays off 100 in state u and 80 in state d and costs 90 today In your solution, form a replicating portfolio with quantity Ai of S and a quan- la(i) Price a derivative that pays off the greater of S1 and S2, i.e. has the payoff la(ii) Price a call on S1 with strike 110. la(iii) Price a put on S- with strike 100