Complete two-state market
= Complete two-state market
Two assets with linearly independent payoff vectors across two positive-probability states span all terminal payoffs. The state-price equations have a unique solution. A positive solution gives the <state-price density> after division by physical state probabilities. <Arrow state prices> sum to the riskless <discount factor>, while normalized <Arrow state prices> are <risk-neutral probabilities>; these three quantities must not be confused.