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  3. 1. the stock price process for a stock is given by

1. The stock price process for a stock is given by (S0, S1, S2, S3)...

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1. The stock price process for a stock is given by (S0, S1, S2, S3) in the 2-period binomial model with model parameters r, u, and d as given below: 1 So = 12, r=; 3 U= 2 1 2 For the remainder of this problem, you are to work with a 3-period American put on this stock with a strike price of 11. (a) Work out the full tree for the price process (S0, S1, S2) for this stock. (b) Work out the full tree for the intrinsic value process (Go, G1, G2) for this security. (c) Work out the full tree for the value process (V, V1, V2) for this security. (d) Determine an optimal stopping time 7 for this security. 1. The stock price process for a stock is given by (S0, S1, S2, S3) in the 2-period binomial model with model parameters r, u, and d as given below: 1 So = 12, r=; 3 U= 2 1 2 For the remainder of this problem, you are to work with a 3-period American put on this stock with a strike price of 11. (a) Work out the full tree for the price process (S0, S1, S2) for this stock. (b) Work out the full tree for the intrinsic value process (Go, G1, G2) for this security. (c) Work out the full tree for the value process (V, V1, V2) for this security. (d) Determine an optimal stopping time 7 for this security

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