Replication via Forward Contracts. In the 1-step binomial model, replicate the option payoff at expiration via \(Q_{0}\) amount of a forward contract with delivery price of \(K_{0}\).

(a) Solve for \(Q_{0}, K_{0}\)

\[Q_{0}\left(A_{u}-K_{0}ight)=C_{u}, \quad Q_{0}\left(A_{d}-K_{0}ight)=C_{d}\]

(b) Compute today's value of the above replicating forward contract: \(Q_{0} \times V F_{A}\left(0, T, K_{0}ight)\).

(c) Is \(C_{0}=Q_{0} \times V F_{A}\left(0, T, K_{0}ight)\) the same as Formula 5.3?