An experiment can result in any of the outcomes 1, 2, or 3. (a) If there are two different wagers,
with:
r1(1) = 4, r1(2) = 8, r1(3) = −10 r2(1) = 6, r2(2) = 12, r2(3) = −16
is an arbitrage possible?
(b) If there are three different wagers, with:
r1(1) = 6, r1(2) = −3, r1(3) = 0 r2(1) = −2, r2(2) = 0, r2(3) = 6 r3(1) = 10, r3(2) = 10, r3(3) = x what must x equal if there is no arbitrage?
For both parts, assume that you can simultaneously place wagers at any desired levels.