Well what we want is to be able to find the market’s prediction for EV|C and EV|~C. In the course of this we also need to find p(C) = 1-p(~C). In other words, there are 3 free parameters, so you could use 3 traded thingies in one market. A, B and A+C, for instance.
This effectively results in three exchange rates (A/B, A/A+C, B/A+C) that need to be compared; the two-market solution (A/A+C, B/B+D) is actually simpler.
Well what we want is to be able to find the market’s prediction for EV|C and EV|~C. In the course of this we also need to find p(C) = 1-p(~C). In other words, there are 3 free parameters, so you could use 3 traded thingies in one market. A, B and A+C, for instance.
This effectively results in three exchange rates (A/B, A/A+C, B/A+C) that need to be compared; the two-market solution (A/A+C, B/B+D) is actually simpler.
Well, “simpler” depends on your definition. But yeah, it’s probably better because its easier to comprehend.