Find the option price using a replicating portfolio

Reference no: EM13281407

If we are given a stock (price 1)that we are allowed to trade halfway with probability .5 in which the halfway maturities are 2 and .5, and then the full maturities are 4,1,1,.25 with probability of .5 for each again. We have a call option c with maturities 3,0,0,0 (respective to the stock maturities) with a .25 probability. How do we find the option price using a replicating portfolio?

Reference no: EM13281407

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