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(10 points) Consider a 1-period binomial model with ud = 1 and 7 2 0. Assume that the initial stock price is S. Suppose that you know that the price...

uanddelta.pngI couldn't figure out how to solve this question. Could any one help me?

uanddelta.png

1. (10 points) Consider a 1-period binomial model with ud = 1 and 7° 2 0. Assume that the initial stock
price is S. Suppose that you know that the price of an at-the—money (i.e. With K = S) call option is C. Find u and the delta of this call option in terms of S and C. 5+0 1 C
Answer. u—fl,A—§+§.

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