Part A: Binomial Option Pricing - Risk Neutral Probability Method You are required to first price a non-dividend paying Put Option using a 3-step binomial option pricing tree with following information: Initial Stock Price (S) Strike Price (K) Risk-free rate ( p.a.) Volatility (sigma) Time to Maturity (t: years) Number of time periods (n) 64 66 0.06 0.35 0.75 3 The stock tree has already been filled out - use this to calculate the u and d factors 108. 1893663 90.82032311 76.23975786 76.23975786 Stock Price 64 64 53.72524933 53.72524933 45. 10003774 37.85954332 Time 0 Time 1 Time 2 Time 3 3 Step Binomial Tree u d Next, use u and d to calculate p and q- remember to consider the time period in the calculations q (1-p) Calculate the present value of the European Put Option European Put Value Time 0 Time 3 Time 1 Time 2 3 Step Binomial Tree Next, calculate the prevent value of the American Put Option American Put Value Time 0 Time 3 Time 1 Time 2 3 Step Binomial Tree Part A: Binomial Option Pricing - Risk Neutral Probability Method You are required to first price a non-dividend paying Put Option using a 3-step binomial option pricing tree with following information: Initial Stock Price (S) Strike Price (K) Risk-free rate ( p.a.) Volatility (sigma) Time to Maturity (t: years) Number of time periods (n) 64 66 0.06 0.35 0.75 3 The stock tree has already been filled out - use this to calculate the u and d factors 108. 1893663 90.82032311 76.23975786 76.23975786 Stock Price 64 64 53.72524933 53.72524933 45. 10003774 37.85954332 Time 0 Time 1 Time 2 Time 3 3 Step Binomial Tree u d Next, use u and d to calculate p and q- remember to consider the time period in the calculations q (1-p) Calculate the present value of the European Put Option European Put Value Time 0 Time 3 Time 1 Time 2 3 Step Binomial Tree Next, calculate the prevent value of the American Put Option American Put Value Time 0 Time 3 Time 1 Time 2 3 Step Binomial Tree