New answers tagged homework
Hint The future world has 4 states: $(0.5,0.5), (2,0.5), (0.5,2), (2,2)$. You have 4 instruments - cash, each stock, and an option they are both \$2 which is traded. Take $x,y,z,w$ of each and match the portfolio to the price of the option in each market state. You get 4 equations and 4 unknowns, solve, and supposedly you get a unique solution, which ...
Top 50 recent answers are included