(a) Describe the (Cox-Ross-Rubinstein) binomial model. When is the model arbitragefree? How is the equivalent martingale measure characterised in this case?

(b) What is the price and the hedging strategy for any given contingent claim $C$ in the binomial model?

(c) For any fixed $0<t<T$ and $K>0$, the payoff function of a forward-start-option is given by

$$\left(\frac{S_{T}^{1}}{S_{t}^{1}}-K\right)^{+}$$

Find a formula for the price of the forward-start-option in the binomial model.