Which of the following is not sufficient for a pricing tree for risky bonds to be free of arbitrage?
A) The existence of a risk-neutral pricing probability measure.
B) The existence of a general equilibrium in the asset markets.
C) All normalized (discounted) assets are martingales.
D) On the tree, the gross risk-free one-period return is straddled by the return when rates move up and when rates move down.

Question

Which of the following is not sufficient for a pricing tree for risky bonds to be free of arbitrage? 
A) The existence of a risk-neutral pricing probability measure.
B) The existence of a general equilibrium in the asset markets.
C) All normalized (discounted) assets are martingales.
D) On the tree, the gross risk-free one-period return is straddled by the return when rates move up and when rates move down.

Quizplus · Accepted Answer

The Answer of Which of the following is not sufficient for a pricing tree for risky bonds to be free of arbitrage? 
A) The existence of a risk-neutral pricing probability measure.
B) The existence of a general equilibrium in the asset markets.
C) All normalized (discounted) assets are martingales.
D) On the tree, the gross risk-free one-period return is straddled by the return when rates move up and when rates move down.

Which of the Following Is Not Sufficient for a Pricing