(Solution) - In Example 4 1 14 we showed how to price an option -(2025 Original AI-Free Solution)

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In Example 4.1.14, we showed how to price an option to buy one share of a stock at a particular price at a particular time in the future. This type of option is called a call option. A put option is an option to sell a share of a stock at a particular price $y at a particular time in the future. (If you don?t own any shares when you wish to exercise the option, you can always buy one at the market price and then sell it for $y.) The same sort of reasoning as in Example 4.1.14 could be used to price a put option. Consider the same stock as in Example 4.1.14 whose price in one year is X with the same distribution as in the example and the same risk-free interest rate. Find the risk-neutral price for an option to sell one share of that stock in one year at a price of $220.