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Explain how to derive European call option price under the one-step binomial tree model with...

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Finance

  1. Explain how to derive European call option price under the one-step binomial tree model

    with the following steps.

(a) Compose a riskless portfolio with delta for a short call position.

(b) Find a European call price with the risk-neutral probability by using no-arbitrage principle under the one-step binomial tree model.

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