(4) For Q a risk neutral measure define L(w) = Q(w) P(w)' called the state price...

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(4) For Q a risk neutral measure define L(w) = Q(w) P(w)' called the state price density. Prove the following about the risk premium: E(R) ― Rf-Cov(Rk, L) k = 1,..., N. Let (Ho, H₁,..., HN) be an arbitrary trading strategy with initial investment V₁ > 0 leading to a portfolio payoff Vr with rate of return Ry, prove: E(Rv) - Rf = -Cov(Ry, L). (4) For Q a risk neutral measure define L(w) = Q(w) P(w)' called the state price density. Prove the following about the risk premium: E(R) ― Rf-Cov(Rk, L) k = 1,..., N. Let (Ho, H₁,..., HN) be an arbitrary trading strategy with initial investment V₁ > 0 leading to a portfolio payoff Vr with rate of return Ry, prove: E(Rv) - Rf = -Cov(Ry, L).