(c) Consider a market with just 2 assets and 2 states defined by 2 1 0.5 D = (;;) P1 = P2 = (1) 3 3 0.5 2 Here D is the pay-off matrix and p, and p2 are 2 column vectors of initial prices; all prices are in . 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) (c) Consider a market with just 2 assets and 2 states defined by 2 1 0.5 D = (;;) P1 = P2 = (1) 3 3 0.5 2 Here D is the pay-off matrix and p, and p2 are 2 column vectors of initial prices; all prices are in . 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)