Ouestion 2. The Binomial Option Pricing The spot price of SPY is currently $200 (i.e. So= $200). The volatility of SPY is 60% (i.e. 0.60). We are interested in valuing SPY option at the end of 6 months (i.e. At or T= 6/12 0.5). The risk-free rate with continuous compounding is 4% per annum (i.e. r = 0.04) Question 2- Part (A) [Arbitrage Portfolio Approach Apply the Arbitrage Portfolio approach with one-step binomial tree and calculate the value of a 6-month European CALL option on SPY with an exercise/strike price of $220 (i.e. K= $220) Question 2- Part (B) [Risk-Neutral Valuation Approach| Apply the Risk-Neutral Valuation approach with one-step binomial tree and calculate the value of a 6-month European CALL option on SPY with an exercise/strike price of $220 (1.e. K S220). Verify that the Risk-Neutral Valuation approach can provide the same result as in Part (A) of Question 2. Ouestion 2. The Binomial Option Pricing The spot price of SPY is currently $200 (i.e. So= $200). The volatility of SPY is 60% (i.e. 0.60). We are interested in valuing SPY option at the end of 6 months (i.e. At or T= 6/12 0.5). The risk-free rate with continuous compounding is 4% per annum (i.e. r = 0.04) Question 2- Part (A) [Arbitrage Portfolio Approach Apply the Arbitrage Portfolio approach with one-step binomial tree and calculate the value of a 6-month European CALL option on SPY with an exercise/strike price of $220 (i.e. K= $220) Question 2- Part (B) [Risk-Neutral Valuation Approach| Apply the Risk-Neutral Valuation approach with one-step binomial tree and calculate the value of a 6-month European CALL option on SPY with an exercise/strike price of $220 (1.e. K S220). Verify that the Risk-Neutral Valuation approach can provide the same result as in Part (A) of Question 2