Consider a three-period binomial model for stock price with t=0.25 years. Let S0=10,r=5%, u=1.25 and d=1/u. Consider a lookback option which has payoff: V3=(max0n3Sn)S3 (a) Consider a bank that has a long position in this lookback option. The bank intends to hold this option until expiration and receive the payoff V3. At time zero, the bank has capital V0 tied up in the option, where V0 is the price from part (a). Irrespective of what happens to the stock price (and consequently the payoff of the lookback option), the bank wants to earn the interest rate of 5% on this capital until time three, i.e. the bank wants to have e0.050.75V0 at time three (after collecting the payoff from the lookback option at time three). Specify how the bank's trader should invest in the stock and the bond account to accomplish this. The bank requires that the strategy ask for a net-zero investment from the bank. Consider a three-period binomial model for stock price with t=0.25 years. Let S0=10,r=5%, u=1.25 and d=1/u. Consider a lookback option which has payoff: V3=(max0n3Sn)S3 (a) Consider a bank that has a long position in this lookback option. The bank intends to hold this option until expiration and receive the payoff V3. At time zero, the bank has capital V0 tied up in the option, where V0 is the price from part (a). Irrespective of what happens to the stock price (and consequently the payoff of the lookback option), the bank wants to earn the interest rate of 5% on this capital until time three, i.e. the bank wants to have e0.050.75V0 at time three (after collecting the payoff from the lookback option at time three). Specify how the bank's trader should invest in the stock and the bond account to accomplish this. The bank requires that the strategy ask for a net-zero investment from the bank