Assume that the price S of a risky asset follows a binomial model with S(0) = $100,...

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Assume that the price S of a risky asset follows a binomialmodel with S(0) =
$100, u = 10% and d = -10%. The underlying asset pays a dividend of$5 on the odd times, i.e., 1; 3; 5...,
and only if the price is strictly higher than $95. In this market,the risk-free rate is 0% (zero).
You are called to price a European call with strike price K = 87and expiry date N = 3 with the additional
restriction that during the life of the call the stock price hasnot exceeded the value of $110.

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solu Given current price S 100 risk free rate r 0 Assume 1 a portfolio made up of one European call and h shares of the stock where investor owns h shares and writes a call option 2 Since risk See Answer

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Assume that the price S of a risky asset follows a binomialmodel with S(0) =$100, u = 10% and d = -10%. The underlying asset pays a dividend of$5 on the odd times, i.e., 1; 3; 5...,and only if the price is strictly higher than $95. In this market,the risk-free rate is 0% (zero).You are called to price a European call with strike price K = 87and expiry date N = 3 with the additionalrestriction that during the life of the call the stock price hasnot exceeded the value of $110.