Steps: . You will need 4 trees: (1) underlying S [2) Asian call 0 (3) hedge ratio A (4-) cash account B. . Begin by setting up the tree for the underlying. While it is possible to write this tree as recombining (as in the examples we considered in lecture 10), it will be easier for the subsequent analysis to write the tree of the underlying as nonrecombining (as in the illustration above). . Next, set up the tree for the Asian call and compute its' payoffs in the nal period. . Then, set up trees for the hedge ratio and the cash account and work your way from the last period back as usual. . All trees should be nonrecombining as in the illustration above