I am very new to financial math so I am not sure how to do with this question. A friend sent me this question to practice but I am unsure how to begin. I read about call option . Can that be used for any option? Any help would be appreciated.
Consider the following discrete time one-period market model. The savings account is at \$1 at time 0 and \$$\beta$ at time 1. The stock price is given by $S_0 = 1$ and $S_1 = \xi$ where $\xi$ is a random variable taking two possible values $u$ and $d$, each with positive probability. Moreover, assume that $0 < d < \beta < u$. Find, with proof, the risk-neutral measure of this model. Does this model have arbitrage opportunities?