FINN 6203 Homework 4 3. There are K = 5 states, N = 4 securities and T = 2 periods. i. Is the price system an equilibrium price system? Solution. Check that all D (t, )Q[t, St1 ()] = (1 + r)p(t 1, ) have positive solutions. 1.5 2.5 3.5 1 which has solutio

FINN 6203 Homework 3 1. There are S = 3 states and N = 3 securities with payos 60 110 30 D = 50 120 30 53 127 30 and prices p = [28, 59, 15] . The actual probability measure is given by P = [1/2, 1/10, 2/5]. i. Find the discount factor m that can price al

FINN 6203 Homework 2 Solutions 1. Consider a one-period model with N = 3 securities and S = 3 states. The payos of the securities are given by 24 44 12 D = 20 44 12 48 36 12 The prices of these securities are p1 = 35, p2 = 40, and p3 = 12. i. Do equilibri