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You convert a state price vector into risk-neutral probabilities by multiplying each state price by the gross risk-free factor $(1+i)$, where $i$ is the per-period risk-free interest rate. This scaling transforms the monetary prices of Arrow-Debreu securities into a valid probability distribution that sums to 1.

Conditions: The state prices $\psi_j$ are already determined.; $i$ is the known per-period risk-free interest rate.; The market is a one-period finite-state model.

You convert a state price vector into risk-neutral probabilities by multiplying each state price by the gross risk-free factor $(1+i)$, where $i$ is the per-period risk-free interest rate. This scaling transforms the monetary prices of Arrow-Debreu securities into a valid probability distribution that sums to 1.

Conditions: The state prices $\psi_j$ are already determined.; $i$ is the known per-period risk-free interest rate.; The market is a one-period finite-state model.