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We use Derman and Kani's notations. Arrow-Debreu prices The Arrow-Debreu price $\lambda_i$ is the price of the security $\Lambda_i$ paying \$1 in node $(n, i)$, and \$0 in all other states $(n, j)$, for $j \neq i$. Let $\mathbb{P}_{n,j}$ be the risk-neutral probability of getting to state $(n,j)$, from state $(1,1)$. The price of $\Lambda_i$ is the ...

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