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In a 1-period binomial model, with initial stock price 100, if the stock price is either 50,100, or 150 after 1 period then how can I show there is no longer a unique no-arbitrage price for a European call option with strike price K=150. What would the range of values for this price be that ensure there is no arbitrage?

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  • $\begingroup$ How do you have 3 prices in a 1 step binomial model? $\endgroup$
    – Bob Jansen
    May 12, 2020 at 18:39
  • $\begingroup$ Also, your Call would have payoff of zero in an state, no? $\endgroup$ May 12, 2020 at 19:01

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