1. Consider a binomial model with parameters T = 1, So = 100, r = 0, u = d = 0.2, p (0,1). Consider the European contingent claim with payoff 1 if the stock price increases, and payoff ( if the stock price decreases. (a) Compute the replicating portfolio. (b) Compute the initial value of the replicating portfolio. 1. Consider a binomial model with parameters T = 1, So = 100, r = 0, u = d = 0.2, p (0,1). Consider the European contingent claim with payoff 1 if the stock price increases, and payoff ( if the stock price decreases. (a) Compute the replicating portfolio. (b) Compute the initial value of the replicating portfolio