Question Desciption-It should be answered by building a 15-period binomial model whose parameters should be calibrated to a Black-Scholes geometric Brownian motion model with:T = .25

T=.25years,S_{0} = 100

S0=100,r = 2\%

r=2%,sigma = 30%

=30%

and a dividend yield ofc = 1%.

c=1%.

Hint

Your binomial model should use a value ofu = 1.0395...

u=1.0395.... (This has been rounded to four decimal places)

Question)Compute the fair value of an American call option with strikeK = 110

K=110and maturity

n = 10

n=10periods where the option is written on a futures contract that expires after

15 periods. The futures contract is on the same underlying security of the previous

questions.What is the earliest time period in which youmightwant to exercise the American

futures option ?