Consider a binomial tree of depth 3 over a T of 9 months expiry, and an underlying stock S with S(0)=15, r=0.08 and =0.25. Use the probability space (,F=2,P), where P(w)=81,w. Let A denote the set of events of having two consecutive up's and B denote the set of events that in which any u must be followed by a d. 1 Gradeables 1. Define S(t) as the stochastic process of prices through time, calculate and interpret (a) E[S(2)] (b) E[S(1)A] (c) E[S(2)S(1)] 2. Now with option prices!, Calculate (a) c(14.5,TA). (b) c(14.5,TS(2)). 3. Calculate the price of an Asian floating point put