Question
I need help with generating three things: payoff matrices of an asset market, price vector of the securities market, and arbitrage portfolios. A typical question
I need help with generating three things: payoff matrices of an asset market, price vector of the securities market, and arbitrage portfolios. A typical question is structured as follows:
Suppose there are two states of nature in the future. In the asset market, there are the two contingent claims, one for each state. There's a third security with payoffs x=(4,1). Suppose the prices of the contingent claims are both 1/2: p(c(s1))= p(c(s2))=1/2. The price of the third security is 3.
I'm not interested in just specific answers to this question. Frameworks for further use are what I'm after. Thanks.
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