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  3. 1. there are assets below: 700 300 pu = 0.5 500 c

1. There are assets below: 700 300 Pu = 0.5 500 C 300 0 Stock...

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1. There are assets below: 700 300 Pu = 0.5 500 C 300 0 Stock Call 1 1.05 Risk-free asset (a) Calculate the call option price using a replicating portfolio (b) Calculate the call option prices using an equivalent martingale measure (use the risk-free asset as a numraire). (c) Calculate the call option prices using an equivalent martingale measure (use the stock as a numraire) (d) Calculate the call option prices using the Arrow-Debreu state prices (e) Exploit the arbitrage opportunity when the call option price c = = 200 150 or c 1. There are assets below: 700 300 Pu = 0.5 500 C 300 0 Stock Call 1 1.05 Risk-free asset (a) Calculate the call option price using a replicating portfolio (b) Calculate the call option prices using an equivalent martingale measure (use the risk-free asset as a numraire). (c) Calculate the call option prices using an equivalent martingale measure (use the stock as a numraire) (d) Calculate the call option prices using the Arrow-Debreu state prices (e) Exploit the arbitrage opportunity when the call option price c = = 200 150 or c

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