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Given a 2-period market with above stock price process along with a riskfree stock with a return of 5%, how do I determine whether the market is arbitrage-free and complete when I only have knowledge of one-period models? Is it enough to determine whether each of the 3 one-period models are arbitrage and complete? And if so, why?

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    $\begingroup$ Aren't you missing something in the question? I think they are giving you an options question. You have to figure out the fair value for a call or a put based on this binomial tree. And the stock is not riskfree - there is a riskfree rate. I think you might have misread the q. $\endgroup$ – JoshK May 24 '16 at 15:46

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