Question

Repeat the derivation (from the first principles) of the 1-level tree formula for the price P...

Repeat the derivation (from the first principles) of the 1-level tree formula for the price P of a put.

Assume, as usual, that Sd < S0erT < Su and Sd < E < Su.

If you wrote a put and want to hedge, do you buy or sell stock?

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