1. You are given the following information about a securities market: There are three nondividend-paying stocks, X,Y, and Z. The current stock prices are (Xo, Yo, Zo) = (100, 100, 100). The yearly compounded risk-free interest rate is 1%. There are four possible outcomes for the prices of X,Y, and Zone year from now: (120, 110, 110) (X1w),Y(W), 21 (W) = (110, 120, 100) (90, 80, 100) (80,90,95) = : : :W=W2 : = : = : The market is complete, which means a unique risk-neutral mea- sure exists. Let VCX be the current price of a call option on X, and V.Z the current price of a put on Z. Both options expire in one year, and have a common strike price of K = 100. Let V.XYZ be the initial price of a type of "forward exchange", which at time T = 1 pays X1 + Y1 - 21. Compute the risk-neutral measure (25 pts), and V.CX (25 pts), and (25 pts), and V.XYZ (25 pts). V.P.2 1. You are given the following information about a securities market: There are three nondividend-paying stocks, X,Y, and Z. The current stock prices are (Xo, Yo, Zo) = (100, 100, 100). The yearly compounded risk-free interest rate is 1%. There are four possible outcomes for the prices of X,Y, and Zone year from now: (120, 110, 110) (X1w),Y(W), 21 (W) = (110, 120, 100) (90, 80, 100) (80,90,95) = : : :W=W2 : = : = : The market is complete, which means a unique risk-neutral mea- sure exists. Let VCX be the current price of a call option on X, and V.Z the current price of a put on Z. Both options expire in one year, and have a common strike price of K = 100. Let V.XYZ be the initial price of a type of "forward exchange", which at time T = 1 pays X1 + Y1 - 21. Compute the risk-neutral measure (25 pts), and V.CX (25 pts), and (25 pts), and V.XYZ (25 pts). V.P.2