Question: need hand writing 3. (20 points) Consider the binomial asset pricing model. Assume the stock's current price is S0=4, the up factor u=2, the down

need hand writing 3. (20 points) Consider the binomial asset pricing model. need hand writing

3. (20 points) Consider the binomial asset pricing model. Assume the stock's current price is S0=4, the "up factor" u=2, the "down factor" d=1/2, and the risk-free interest rate is r=1/4. (a) Calculate p~ and q~. p~=q~= (b) Let V2 be a put option with strike price K=3 and expiration date T=2. Complete the following binomial tree. S2[HH]=S1[H]=V2[HH]=S0=4V1[H]=0S2[HT]=V0=8/25V2[HT]=S1[T]=S2[TH]=V1[T]=V2[TH]=S2[TT]=V2[TT]=

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