Question: Q2. For a stock, you are given: (i) The current stock price is 50. (ii) The volatility of the stock is 14.14%. (iii) The stock

Q2. For a stock, you are given: (i) The current stock price is 50. (ii) The volatility of the stock is 14.14%. (iii) The stock pays dividends continuously at a rate proportional to its price at rate 1%. (iv) The continuously compounded risk-free interest rate is 2%. Solve the following questions using a 2-period forward binomial tree. (a) Find the current price of a 2-year 45-strike European Lookback put with payoff at maturity given by X= = (K - min, s S). (b) Find the current price of a 2-year 45-strike American Lookback put with payoff at time t (0,7) given by X = K - min S. = (K Osust Q2. For a stock, you are given: (i) The current stock price is 50. (ii) The volatility of the stock is 14.14%. (iii) The stock pays dividends continuously at a rate proportional to its price at rate 1%. (iv) The continuously compounded risk-free interest rate is 2%. Solve the following questions using a 2-period forward binomial tree. (a) Find the current price of a 2-year 45-strike European Lookback put with payoff at maturity given by X= = (K - min, s S). (b) Find the current price of a 2-year 45-strike American Lookback put with payoff at time t (0,7) given by X = K - min S. = (K Osust

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