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The futures price of a ".com" non-dividend stock is $90. The volatility is 20% and...

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The futures price of a ".com" non-dividend stock is $90. The volatility is 20% and the risk-free rate (all maturities) is 5% per year with continuous compounding. Use a three-step tree to value: 1. An eighteen-month European PUT option with strike price $98. Required to design a three-step tree and include the prices of the stock and the value of the option on every node. EUROPEAN PUT Sz- S= fa S3- s Sz= Sz= f= II. Under the "risk neutral valuation": a) Explain the "risk neutral valuation" pricing of derivatives principle. b) What is the percentage up movement? Required the calculation, c) What is the percentage down movement? Required the calculation. d) What is the probability of an up movement in a risk-neutral world? Required the calculation. e) What is the probability of a down movement in a risk-neutral world? Required the calculation. III. Applying "Put-Call parity", find the price for European CALL with same strike, maturity and underlying asset. Required the calculation. IV. If the premium for a CALL option is $13, is there any arbitrageur opportunity? Explain the strategy and find the profit

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