Suppose that u < e(r)h. Show that there is an arbitrage opportunity. Now suppose that d >e(r)h.

Question:

Suppose that u < e(r−δ)h. Show that there is an arbitrage opportunity. Now suppose that d >e(r−δ)h. Show again that there is an arbitrage opportunity.
Many (but not all) of these questions can be answered with the help of the BinomCall and BinomPut functions available on the spreadsheets accompanying this book.