Exercise 11.10 In the extended binomial model considered in Example 11.3, suppose that the up-factor is given by u(S, t) = uSα when S(t) = S and the down-factor d(S, t) = dS−α (cf. Example 8.1). Assuming that R(S, t) = R >

1, calculate by Monte Carlo simulation the call option premium written on this security with parameters u = 1.1, d = 0.9, R = 1.05, S = K = 100, T = 10, and α = 0.1.