Consider a European put option on the stock with So = 100, 0 = 0.16, r=0, T = 1. The option strike K will vary between 75 and 115. (a) Use Variance Gamma model with 0 = 0 to price the option. First take a very small variance rate, such as v = 0.01 (this basically gives you Black-Scholes prices Pbs). Then use v = 0.3 and v = 0.7 to obtain put prices Pg. Compute the ratios ratios VG and plot them as a function of K. How are your plots related to the volatility smile? (b) Now use the model with negative 0 = -0.15. How does it affect the smile? Consider a European put option on the stock with So = 100, 0 = 0.16, r=0, T = 1. The option strike K will vary between 75 and 115. (a) Use Variance Gamma model with 0 = 0 to price the option. First take a very small variance rate, such as v = 0.01 (this basically gives you Black-Scholes prices Pbs). Then use v = 0.3 and v = 0.7 to obtain put prices Pg. Compute the ratios ratios VG and plot them as a function of K. How are your plots related to the volatility smile? (b) Now use the model with negative 0 = -0.15. How does it affect the smile