A company is currently awaiting the outcome of a major lawsuit. This is expect

A company is currently awaiting the outcome of a major lawsuit. This is expected to be known within one month. The stock price is currently $20. If the
outcome is positive the stock price is expected to be S24 at the end of one month. If the outcome is negative it is expected to be $18 at this time. The
one-month risk-free interest rate is 8% per annum.

a. What is the risk-neutral probability of a positive outcome?

b. What are the values of one-month call options with strike prices of $19 $20 $21 $22

and $23?

c. Use DerivaGem to calculate a volatility smile for one-month call options

Verify that the same volatility smile is obtained for one-month put options.