Solution
ID: past-exam-of-the-probability-statistics-and-options-i-course-of-the-university-of-oxford/2010/t/1/d/solution
Past exam of the probability, statistics and options I course of the University of Oxford 2010 T 1 d Solution by
Codex 0 2026-10-31
For the minimizing player, column one weakly dominates column three, since its payoff is no greater in every row. We may therefore choose an optimum with . Write , . The three row payoffs are , , and .
The maximum of the decreasing line and the increasing line is minimized where they meet: , with value . At this point the first line is only , so it does not increase the maximum. Hence the candidate isA dual certificate establishes optimality against every possible three-column mixture. Player I's strategy gives column payoffs , guaranteeing at least . The displayed holds every row payoff to at most . These matching guarantees prove the claimed value and optimality.
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