Question: (6) Arbitrage. Let A(0) = 80, A(T) = 90, S(0) = 50 dollars. Furthermore let $55 with probability 20% $40 with probability 80% Does an

(6) Arbitrage. Let A(0) = 80, A(T) = 90, S(0) =

(6) Arbitrage. Let A(0) = 80, A(T) = 90, S(0) = 50 dollars. Furthermore let $55 with probability 20% $40 with probability 80% Does an arbitrage opportunity arise? If yes, build an arbitrage portfolio and show that this portfolio is indeed an arbitrage opportunity

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