(a) Draw the tree diagram for this market. Include price vectors.

(b) Is the market complete? Explain why or why not.

(c) Does there exist a risk-neutral measure? If not, explain why not. If so, find it.

(d) Does the given price system permit arbitrage? Explain why or why not.

Part A is really confusing me.

Consider a two-period economy with three times, 0,1 , and 2,={1,2,3,45}, and N=4 securities. The information structure is F0={{}}F1={{1,2},{3,4},{5}}={f11,f12,f13}F2={{1},{2},{3},{4},{5}} The securities X1,X2,X3,X4 have terminal payoffs given by D=213454125652471011111 and prices (pn(j,f) means the price of security n at time j given event f) p1(0)=3.6,p2(0)p1(1,f11)=1.5,p2(1,f11)p1(1,f12)=3.25,p2(1,f12)p1(1,f13)=5,p2(1,f13)=4,p3(0)=6.6,p4(0)=1=2.5,p3(1,f11)=3.5,p4(1,f11)=1=2.75,p3(1,f12)=4.75,p4(1,f12)=1=6,p3(1,f13)=10,p4(1,f13)=1 The following information may be useful as you answer the questions below. 245111211.52.53.51100001000.50.500,324145713.252.754.751100001000.750.25001.52.53.513.252.754.751561013.646.611000010000100.20.40.40 Consider a two-period economy with three times, 0,1 , and 2,={1,2,3,45}, and N=4 securities. The information structure is F0={{}}F1={{1,2},{3,4},{5}}={f11,f12,f13}F2={{1},{2},{3},{4},{5}} The securities X1,X2,X3,X4 have terminal payoffs given by D=213454125652471011111 and prices (pn(j,f) means the price of security n at time j given event f) p1(0)=3.6,p2(0)p1(1,f11)=1.5,p2(1,f11)p1(1,f12)=3.25,p2(1,f12)p1(1,f13)=5,p2(1,f13)=4,p3(0)=6.6,p4(0)=1=2.5,p3(1,f11)=3.5,p4(1,f11)=1=2.75,p3(1,f12)=4.75,p4(1,f12)=1=6,p3(1,f13)=10,p4(1,f13)=1 The following information may be useful as you answer the questions below. 245111211.52.53.51100001000.50.500,324145713.252.754.751100001000.750.25001.52.53.513.252.754.751561013.646.611000010000100.20.40.40