Question: Typed solution only Consider an one period model with three states and two assets, a risk-free bond B and a stock. Suppose that Bo= 100,

Typed solution only

Typed solution only Consider an one period model with three states and

Consider an one period model with three states and two assets, a risk-free bond B and a stock. Suppose that Bo= 100, BT= 105, So= 10 and ST= (8, 9, 12). Consider a call-option on the stock with exercise price K= 10. Find all the possible arbitrage-free prices for the call option. Consider an one period model with three states and two assets, a risk-free bond B and a stock. Suppose that Bo= 100, BT= 105, So= 10 and ST= (8, 9, 12). Consider a call-option on the stock with exercise price K= 10. Find all the possible arbitrage-free prices for the call option

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