Securities associated with future dates and states

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Reference no: EM131912696

There are three dates and, at any of the two future dates, two possible states of nature. The following table shows the payoff of four assets in future dates in every state of nature. The table also shows the current price of each asset at t = 0. t = 0 t = 1 t = 2 θ1 θ2 θ1 θ2 Asset 1 -6.3 1 5 2 6 Asset 2 -4.1 2 2 4 2 Asset 3 -2.1 4 1 0 0 Asset 4 -1.5 0 3 0 0 (a) Use the current price of existing assets to calculate the price of A-D securities associated with future dates and states. (Note: There are four A-D securities.) (b) Calculate the current price of a complex security that pays $2 in every state of t = 2.

Reference no: EM131912696

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