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2) If Figure 2.5 of our text is replaced by a tree with the price process 130 120 110 110 100 100 90 90 80
2) If Figure 2.5 of our text is replaced by a tree with the price process 130 120 110 110 100 100 90 90 80 70 t=0 t=1 t=2 t=3 Let the claim be that of an option of strike price 105 expiring at t=3. Find the t=3 column for the claim value. Find the option price As in the text, find the hedge portfolio at each node, and its value. Assume that the interest rate is zero. 2) If Figure 2.5 of our text is replaced by a tree with the price process 130 120 110 110 100 100 90 90 80 70 t=0 t=1 t=2 t=3 Let the claim be that of an option of strike price 105 expiring at t=3. Find the t=3 column for the claim value. Find the option price As in the text, find the hedge portfolio at each node, and its value. Assume that the interest rate is zero
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