u(=upfactor) and d(=downfactor) are the following parameters: $\displaystyle u=\frac{S_0(H)}{S_0}$Consider a binomial model with one period and with parameters r(=interest rate) = 1/5, S_0 =

1, d = 3/4, u = 5/4. Compute the price of a European call option with strike price

K = 1, and find a replicating portfolio.

$\displaystyle d=\frac{S_0(T)}{S_0}$

$\displaystyle S_1(H)=\frac{5}{4}$ $\displaystyle S_1(T)=\frac{3}{4}$

How can I determine the price at S_0 ?