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Answer the following regarding replicating portfolios: a. How do you construct a replicating portfolio in the binomial option pricing model? b. How does the replicating

Answer the following regarding replicating portfolios:

a. How do you construct a replicating portfolio in the binomial option pricing model?

b. How does the replicating portfolio for a call option differ from the replicating portfolio of a put option?

c. Explain how a replicating portfolio is the central idea behind option pricing?

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