Calculate the fair price for the option at current time, Financial Management

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Calculate the fair price for the option at current time

Multi-Step Binomial Tree

Suppose that a binomial tree has n steps and the stock has initial price S0 and then at each step, its price can only move up by a factor u or down by a factor d. Let Sk, k=0,1,2...n be the price of the stock at the end of the kth step. For n =3, calculate the fair price for the option at current time corresponding to the initial node of the tree (please write out the explicit formula)

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Financial Management: Calculate the fair price for the option at current time

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