Consider a double-period security market consisting of a bank account with interest rate = 0.1 and one stock. Let the sample space be given by = {1, 2, 3} and let the price of the security be given by

S(0) = 4, S(1, 1) = 5, S(1, 2) = 5, S(1, 3) = 4.5, S(2, 1) = 5.7, S(2, 2) = 4.4, S(2, 3) = 5.7.

Let

H0(1) = 7, H1(1) = 1, H0(2, 1) = 2, H0(2, 2) = 2, H0(2, 3) = 5.

Decide whether there exist H1(2, i), i = 1, 2, 3, such that H = (H0(t), H1(t))t=1,2 is a self-financing trading strategy.