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In the binomial model of option pricing, one can assume that all investors are risk neutral and apply the so-called risk neutral valuation. Explain the

  • In the binomial model of option pricing, one can assume that all investors are risk neutral and apply the so-called "risk neutral valuation". Explain the financial importance of this concept within the binomial model.

  • In the framework of option trading strategies, illustrate the so-called "bull spread" and "bear spread" strategies. Make sure that you write down and comment on the corresponding payoff tables.

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