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A market contains two stocks. Tomorrow, the state of the market could be Superb, Good, Bad or Ugly and this will affect the returns of
A market contains two stocks. Tomorrow, the state of the market could be Superb, Good, Bad or Ugly and this will affect the returns of the stocks denoted by R1 and R2 as shown in the table below.
State of Market | Probability | R1 | R2 |
Superb | 0.2 | 10% | 9% |
Good | 0.4 | 5% | 3% |
Bad | 0.3 | 0% | 0% |
Ugly | 0.1 | - 2% | - 5% |
(Note: The minus sign when market is Ugly)
Based on this information.
a) Write down the Joint Distribution of R1 and R2
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