could you please help solve it? Thanks Exercise 6.2 Consider an experiment with four possible outcomes, andsuppose that the quoted odds for the first three of these outcomes are asfollows.OutcomeOdds122334What must be the odds against outcome 4 if there is to be no possi-ble arbitrage when one is allowed to bet both for and against any of theoutcomes?

Name: could you please help solve it? Thanks Exercise 6.2 Consider an experi
Uploaded: 2024-03-20T07:07:37.000Z
Channel: Bartleby
Description: could you please help solve it? Thanks Exercise 6.2 Consider an experiment with four possible outcomes, andsuppose that the quoted odds for the first three of these outcomes are asfollows.OutcomeOdds122334What must be the odds against outcome 4 if th

The probability is, pi=11+OiWhere, Oi is the odds correspnding to i. So, the sum of pi is 1 this is the condition. i.e. Σ(11+Oi)=11:3813 The given is, Outcomes odds 1 2 2 3 3 4 The odd against outcome 1 is 2:1 The odd against outcome 2 is 3:1 The odd against outcome 3 is 4:1. So, the probability is, Σpi=11+o1+11+o2+11+o3+11+o4=1 13+14+15+11+o4=1 11+o4=1-13-14-15 11+o4=1360 o4=4713 So, the odd against outcome 4 is, 47:13 -----> 1: 3 8/13