(b) Consider a market with just 2 assets and 2 states defined by 4 D = 66 (82) P1 = ().- () 1 2 Here D is the pay-off matrix and p, and p2 are 2 column vectors of initial prices. i. Are the markets composed of D, P and D, P2 arbitrage-free? If not, find an arbitrage portfolio. (4 marks) ii. Find the initial prices of a call and a put option with the same strike price of 1.5 on the first asset in the market composed of D, P2. Does Put-Call parity hold? (6 marks) Total Marks 20 (b) Consider a market with just 2 assets and 2 states defined by 4 D = 66 (82) P1 = ().- () 1 2 Here D is the pay-off matrix and p, and p2 are 2 column vectors of initial prices. i. Are the markets composed of D, P and D, P2 arbitrage-free? If not, find an arbitrage portfolio. (4 marks) ii. Find the initial prices of a call and a put option with the same strike price of 1.5 on the first asset in the market composed of D, P2. Does Put-Call parity hold? (6 marks) Total Marks 20