Question: Use the same setting as Problem 3 . Modify the binomial tree pricing algorithm to compute prices of an American Put PA(K) with maturity T

 Use the same setting as Problem 3 . Modify the binomial

Use the same setting as Problem 3 . Modify the binomial tree pricing algorithm to compute prices of an American Put PA(K) with maturity T and strike K. 1. Compute PA(K) as a function of strike K, with K=85,85.5,86,,110. Hand-in the plot of KPA(K) 2. Compute and plot the difference between the American and European Put premia PA(K)PE(K). For what strikes is this difference the largest? When is it the smallest

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