Question 3 [additive v. multiplicative Binomial tress] The lecture examples, and in fact all subsequent Binomial examples, utilise a multiplicative tree. The reason for using a multiplicative tree is apparent when we dont use it. Consider a Binomial model where price movements are additive. For example, a stock is currently priced at $3. We will model its evolution through time using an additive Binomial model. Assume that, in any given period, stock price will either rise by $3 or fall by $2. Draw a two-step Binomial tree. What is the obvious problem here in modelling share price using additive price movements?