Question: Q6. Binomial tree a) Define and explain the numerical binomial tree method. Give an example of pricing a call using two periods. b) Is there

Q6. Binomial tree
a) Define and explain the numerical binomial tree method. Give an example of pricing a call using two periods.
b) Is there a relationship between the binomial tree and the formula of Black Scholes Merton (1975)?
c) Is the binomial tree useful for the calculation of dividend-bearing American options. Give an example of calculation.
d) Explain the concept of probability *** over risk in relation to the notion of usual probability.

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