A Market on Unseen Dice
Four players at a table each shake a sealed cup holding fair six-sided dice; nobody, including the shakers, has seen any face. You must make a market on the grand total of all dice. (a) What is fair value, and what would you quote to open? (b) A confident counterparty sells you contracts at your bid of — how do you adjust your quote? (c) One cup is lifted and its dice show a total of . What is your new fair value?
Answer
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