Question: This is a problem from Introduction to Linear Optimization by Dimitris Bertsimas and John N. Tsitsiklis . Exercise 4.33 (Options pricing) Consider a market that

This is a problem from

Introduction to Linear Optimization by Dimitris Bertsimas and John N. Tsitsiklis.

Exercise 4.33 (Options pricing) Consider a market that operates for a single period, and which involves three assets: a stock, a bond, and an option. Let S be the price of the stock, in the beginning of the period. Its price g at the end of the period is random and is assumed to be equal to either 311., with probability ,8, or Sd, with probability 1 ,8. Here u and d are scalars that satisfy 0'.

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