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Consider a one-period model with 2 states and 2 assets: a bond and a stock. Assume that r = 0 so that the bond sells
Consider a one-period model with 2 states and 2 assets: a bond and a stock. Assume that r = 0 so that the bond sells for $1 at t = 0 and paid $1 at t = 1. The initial stock price is $20 and it has two possible prices $30 and $15 at t = 1.
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