Consider the sample space = f1; 2; 3g and the probability measure P giving each point weight 1=3. On this probability space consider the nite model with T = 1, S0 0 = S0 1 = 1, S1 0 = 2, and S1 1 (1) = 1; S1 1 (2) = 2; S1 1 (3) = 4: (a) This market is viable, so there is at least one EMM. Find all possible EMMs. (b) Compute V+(X) and V(X) for the contingent claim X given by X(1) = 1; X(2) = 3; X(3) = 9: (c) Find a trading strategy = (01 ; 11 ) such that V1() X and V0() = V+(X). (d) Consider the contingent claim Y given by Y (1) = 2; Y (2) = 4; Y (3) = 8:

d

step-by-step explanation:

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step-by-step explanation:

{x = -1/2 ,   y = -1

step-by-step explanation:

solve the following system:

{2 x + y = -2

{10 x - 3 y = -2

in the first equation, look to solve for y:

{2 x + y = -2

{10 x - 3 y = -2

subtract 2 x from both sides:

{y = -2 x - 2

{10 x - 3 y = -2

substitute y = -2 x - 2 into the second equation:

{y = -2 x - 2

{10 x - 3 (-2 x - 2) = -2

10 x - 3 (-2 x - 2) = (6 x + 6) + 10 x = 16 x + 6:

{y = -2 x - 2

{16 x + 6 = -2

in the second equation, look to solve for x:

{y = -2 x - 2

{16 x + 6 = -2

subtract 6 from both sides:

{y = -2 x - 2

{16 x = -8

divide both sides by 16:

{y = -2 x - 2

{x = -1/2

substitute x = -1/2 into the first equation:

{y = -1

{x = -1/2

collect results in alphabetical order:

answer:   {x = -1/2 ,   y = -1

what are the statments

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