Problem 1 (10 points) A stock process starts at time 0 at 100 and then can go 30 up or 10 down for each time step. We consider two time steps, the risk-free interest rate is 10%. Consider a European call option with strike price of $100. 1. Sketch the Stock process. 2. Find the option value at all nodes of the tree. 3. Assume that the stock first goes down and then goes up. Compute the necessary holdings (, ) of stock and bond at each time step to hedge the above option. Problem 1 (10 points) A stock process starts at time 0 at 100 and then can go 30 up or 10 down for each time step. We consider two time steps, the risk-free interest rate is 10%. Consider a European call option with strike price of $100. 1. Sketch the Stock process. 2. Find the option value at all nodes of the tree. 3. Assume that the stock first goes down and then goes up. Compute the necessary holdings (, ) of stock and bond at each time step to hedge the above option