A non-dividend paying stock, currently priced at 300, is expected to go up by 30% or go down by 20% over a period. The risk free rate for one period is 2%. a) Build a 2-period tree of stock prices. b) Price a European put option with strike of $330 using the binomial pricing model. c) Calculate and explain the hedge ratio that makes risk-neutral pricing possible. Demonstrate the value of the hedge portfolio for buying 1000 put options currently and both when the stock price goes up and goes down. d) How does the hedge ratio change and how many shares do you need to buy/sell to stay hedged in point u? e) Price an American put option with strike price $330. A non-dividend paying stock, currently priced at 300, is expected to go up by 30% or go down by 20% over a period. The risk free rate for one period is 2%. a) Build a 2-period tree of stock prices. b) Price a European put option with strike of $330 using the binomial pricing model. c) Calculate and explain the hedge ratio that makes risk-neutral pricing possible. Demonstrate the value of the hedge portfolio for buying 1000 put options currently and both when the stock price goes up and goes down. d) How does the hedge ratio change and how many shares do you need to buy/sell to stay hedged in point u? e) Price an American put option with strike price $330