lecture3 - Markets and Portfolios Example N contingent...

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e62: lecture 3 24/09/10 Markets and Portfolios N contingent claims, M payoff-relevant outcomes Payoff matrix Market prices Portfolio vector Portfolio payoff Portfolio price 1 P ∈± M × N ρ N x N Px M ρ x e62: lecture 3 24/09/10 Example 2 outcome payoff outcome payoff P = 08 07 06 05 04 03 12 21 30 40 50 60 70 80 x = ± 0 . 5 1 ² outcome payoff 0.5 ! 1 ! + = 8 7 6 5 4 3 2 . 5 2 1 . 5 2 2 . 5 3 3 . 5 4 ρ =[ 32 ] ρ x =3 . 5 e62: lecture 3 24/09/10 Markets, Linear Algebra, and Linear Programming Linear algebra questions Can all payoff vectors be replicated?
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lecture3 - Markets and Portfolios Example N contingent...

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