Can you explain what happens to the tree model in the previous two questions if we lift
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Can you explain what happens to the tree model in the previous two questions if we lift the restriction that pt must be the same at all nodes in time period t? This means that we do not require p(t, j) = pt for all nodes j. Does this result in an arbitrage violation?
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Suppose we are able to find a set of valid probabilities pt for each time t Then we know tha...View the full answer
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