For Derivative Securities

1. The risk free return for each period is exp(0.05). Consider the following stock price dynamics. time 0 time1 time 2 120 110 111 95 105 97 100 a. Find the time 0 prices of options on the stock with the following characteristics T(Maturity) Call/Put Call Put Put Call Strike Price 100 105 100 115 Let us denote 0,u,d the time-0 stop, the time-1 spot when S_1=110, and the time-1 spot when S 1=0. We find the q for each spot as follows