1. Suppose that in a finance economy with T = 1 and S = 3 there are only two securities with payoffs Z = -1 2 0 2 2 Are there security prices that allow a strong arbitrage? 2. Again with T = 1 and S = 3 consider the three securities 1 0 1 Z= 1 1 0 ( 0 1 1 at security prices p = (1,1/2,1/2). Suppose investors are constrained to form portfolios of only two of the three securities. (1) Does there then exist an arbitrage? (2) Without this constraint when investors can form portfolios freely-does there exist an arbitrage? 1. Suppose that in a finance economy with T = 1 and S = 3 there are only two securities with payoffs Z = -1 2 0 2 2 Are there security prices that allow a strong arbitrage? 2. Again with T = 1 and S = 3 consider the three securities 1 0 1 Z= 1 1 0 ( 0 1 1 at security prices p = (1,1/2,1/2). Suppose investors are constrained to form portfolios of only two of the three securities. (1) Does there then exist an arbitrage? (2) Without this constraint when investors can form portfolios freely-does there exist an arbitrage