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The physical probability of the upstate (downstate) is, say, 50% (50%). A claim paying 1 in the upstate and nothing in the downstate is worth
The physical probability of the upstate (downstate) is, say, 50% (50%). A claim paying 1 in the upstate and nothing in the downstate is worth e 0.44. Another claim paying e 1 in the downstate and nothing in the upstate is worth e 0.48. Calculate the risk-neutralized probability!
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