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QUESTION 1 a. Using the following information, calculate the price of a 6-month long put...

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QUESTION 1 a. Using the following information, calculate the price of a 6-month long put option using a two-step binomial tree procedure. So = 15, K = 16, r = 5% (annual), o = 20% (annual). You are given the following equations: a-d u-d (1) a = erat (2) u = eovat (3) d = (4) f = [pfu + (1 - p)fale-rat (5) (60% question weight) b. Explain the concept of Option Delta. (40% question weight)

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