uppose a stock, not paying any dividend, is currently trading at $50.
In a one period binomial tree model the stock price will either be $65 or $42 in one year. The annual interest rate is 5%. Consider a European put option with strike price equal to $50 and maturity in one year.
In the one period binomial tree model, what is the portfolio of the stock and the bond which replicates the payoff of the put? What is the fair value of the put today?