2. An economist writes a 1-period expectation model for valuing options. The model assumes that the stock starts at S and moves up or down by 20% in 1 year's time with equal probability. Assume rates are zero. (a) Using this expectation model what is the value of a call option struck at K? (b) Now use the 1-period binomial model to calculate the risk-neutral probabilities and thus calculate the risk-neutral value of this call op- tion? (c) Is there an arbitrage between these models? How could you capture it