Question: Hello, please provide detailed proof and analysis. Problem 3. (10 Points) Let A(0) = 100 and 24(1) = 110 be the price of the riskfree

 Hello, please provide detailed proof and analysis. Problem 3. (10 Points)

Hello, please provide detailed proof and analysis.

Let A(0) = 100 and 24(1) = 110 be the price of

Problem 3. (10 Points) Let A(0) = 100 and 24(1) = 110 be the price of the riskfree asset. Suppose the prices of stocks 5'1 and 5'2 can follow the following three possible scenarios, namely, the stock price tree is as follows: 12 12 (3100820)) (3101320)) / ( 0' 0) - (100,100) (120,120) 0* (100, 100) (110, 70) (100,100) (110,70) 1 i 023 \ (100,100) (70,110) W's?" (70,110) Compute the riskneutral probability 10*, q* and 1P*(w,-) for 2' = 1, 2, 3

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