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Using the parameters S = 100 | T =3 | U=2 | D = 0.5 | r = 75% : A.) Use a binomial tree
Using the parameters S = 100 | T =3 | U=2 | D = 0.5 | r = 75% :
A.) Use a binomial tree to determine the value (premium) at the money call (strike=$100).
B.) Use a binomial tree to determine the value (premium) of an at the money put (strike=$100).
C.) Repeat the two previous questions using a strike equal to the forward price. Get the forward price from the parameters.
D.) Draw the payoff diagram for a long call and short put position based on part C. Incorporate the net premium in your diagram.
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