With interest rates equal to 0, two different stocks S1 and S2, both valued

at $1 today, can be worth $2 or $0.50 at some point in the future. If the option that pays

$1 when both S1 = S2 = $2 is traded in the market and is worth $0.125, calculate the

price and replicating portfolio of the option that pays $1 when S1 = $2 but S2 = $0.5.

(You can leave the answer expressed in matricial form if you prefer).