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This is a market consisting only of risky securities In an arbitrage free securities market, there are two non dividend-paying stocks, A and B, both
This is a market consisting only of risky securities
In an arbitrage free securities market, there are two non dividend-paying stocks, A and B, both with current price $90. There are two possible outcomes for the prices of A and B one year from now:
Outcome | A | B |
1 | $100 | $80 |
2 | $60 | $ X |
The current price of a one-year 100-strike European put option on just B is $15.
Determine all possible values of x.
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