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a Today is 29th March 2022, when the CSL Ltd (CSL.AX)'s share is priced at $265.3. Consider an CSL option that expires on 21st July 2022, with a strike price of $270. Assume no dividends are paid on this stock. The annual historical standard deviation of CSL stocks is 26.35%. The risk-free rate is 0.1970% with annual compounding. Ignore transaction costs (e.g. bid-ask spread). a) Using a three-step binomial tree model, calculate theoretical prices today for a) a July American call option, b) a July American put option, c) a July European call option, and d) a July European put option on CSL stock. Draw the trees and show all calculation workings at each node. (12 marks) a Today is 29th March 2022, when the CSL Ltd (CSL.AX)'s share is priced at $265.3. Consider an CSL option that expires on 21st July 2022, with a strike price of $270. Assume no dividends are paid on this stock. The annual historical standard deviation of CSL stocks is 26.35%. The risk-free rate is 0.1970% with annual compounding. Ignore transaction costs (e.g. bid-ask spread). a) Using a three-step binomial tree model, calculate theoretical prices today for a) a July American call option, b) a July American put option, c) a July European call option, and d) a July European put option on CSL stock. Draw the trees and show all calculation workings at each node. (12 marks)

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