1. [10 marks] The CRE model: European claim. Consider 'the GER model of the stock price Swittheriodsandparametersd {1+r a: u. IetPhetheuniquemm-tingale measure for the discounted stud: priee S = SEE. {a} Consider the binary put and call options 1oil-it}: payo'a at T given by CHE} :2 11R.aoi{ST] ={ [1] g: i: ii and - :eK iii-{K} := lln.:c1{5r)={ i] if i E K: By considering the claim CHE") + HiIK}, establish the put-call parity relationship forb'mary options foraxedatriltelf 3v [1. [h] (h.1} Compute the arbitrage price 03$} for the binary call option with the strike price if = Suljl + 1T" using the risk-neutral valuation formula (Stiff) = 3: Ert'iiff 13? Ila (as) Using the putaeall palm; nd tliLe priee PK} ofthe binary put option. to] Let Y and 3 be two European claims with maturity T in the GER model. Assume that the equality TFE(Y) = "173(3) holds for a xed date 5 such that [I 1:: s c: T. Does the equality anti") 2 wow} hold for every 12} g t i: s? are I no Justify your answer to part to) here J, (d) Let Y and E be two European claims with maturity T in the CRR model. We assume that HAY} = saw) for a xed date a such that G c: s e T. Ian we claim that the equality m'} = mIEE} is also valid for every 5 -:: t g 1"? YES NO Justify your answer to part (d) here .1