The price of a security in each time period is its price in the previous time period multiplied either by u=1.25 or d = .8. The initial price of the security is 100. Consider the following exotic European option that expires after five periods and has a strike price of 100. What makes this option exotic is that it becomes alive only if the price after two periods is strictly less than 100. That is it becomes alive only if the price decreases in the first two periods. The final payoff of this option is : Payoff at time 5 = I(S(5)-100)+, where I=1 if (2) 100. Suppose that interest rate is 0.1. (a) What is the no arbitrage cost at time 0 of this option? (b) is the cost of part (a) unique, explain why? No file chosen The price of a security in each time period is its price in the previous time period multiplied either by u=1.25 or d = .8. The initial price of the security is 100. Consider the following exotic European option that expires after five periods and has a strike price of 100. What makes this option exotic is that it becomes alive only if the price after two periods is strictly less than 100. That is it becomes alive only if the price decreases in the first two periods. The final payoff of this option is : Payoff at time 5 = I(S(5)-100)+, where I=1 if (2) 100. Suppose that interest rate is 0.1. (a) What is the no arbitrage cost at time 0 of this option? (b) is the cost of part (a) unique, explain why? No file chosen