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Suppose that, in each period, the cost of a security either goes up by a factor of 2 or goes down by a factor of
Suppose that, in each period, the cost of a security eithergoes up by a factor of 2 or goes down by a factor of 1/2 (i.e., u = 2, d =
1/2). If the initial price of the security is 100, determine the no-arbitragecost of a call option to purchase the security at the end of two periods
for a price of 150.
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