MATH3075 Assignment 1
MATH3075 Assignment 1: Solutions 1. Single-period market model [12marks] Consider a single-period market model M = (B, S) on a sample space Ω = {ω1, ω2, ω3}. Assume that r = 3 and the stock price S = (S0, S1) satisfies S0 = 5 and S1 = (36, 20, 4). The real-world probability P is such that P(ωi) = pi > 0 for i = 1, 2, 3. (a) Find the class M of all martingale measures for the model M. […]
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