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There are two possible states of nature, S = 1, and S = 2, over the next period. There are two securities, i and j.
There are two possible states of nature, S = 1, and S = 2, over the next period. There are two securities, i and j. Security i has a payoff of $10 in state S = 1, and $16 in state S = 2, while security j provides $25 in state S = 1 and $8 in state S = 2 (a) If you want to get a payoff of $16 in state S = 1 and $12.8 in state S = 2, how would you allocate your wealth between the two securities i and j
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