V1

Refer to Subsection 10.16.5. A price system is a mapping II from the set of all contingent claims A' to [0, co) such that 'XP XA '0 = XJ!O = (X)UI n(aX + bX') = all(X) + bli(X'), for all a 2 0, b 2 0, X, X' E X. The price system II is consistent with the market model if I(VN()) = 1(Vo($)). for all admissible strategies p. (i) If P* is an equivalent martingale measure, show 'X PXA "(S/X). = (X)U defines a price system that is consistent. (ii) If II is a consistent price system, show that P* defined by P*(A) = N(S,)14), VAEB, is an equivalent martingale measure. (iii) If the market is complete, there is a unique initial price for a contingent claim