Consider Where Xt is an exponential Wiener process: (a) Calculate the expected value of the increment dZ(t).
Question:
Where Xt is an exponential Wiener process:
(a) Calculate the expected value of the increment dZ(t).
(b) Is Zt a martingale?
(c) Calculate E[Zt]. How would you change the definition of Xt to make Zt a martingale?
(d) How would E[Zt] then change?
Z(t) = e–rtXt,
Xt = cWt.
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Zt e rt X t where X t e Wt This implies that Z t e rtWt a Expected value of in...View the full answer
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Related Book For
An Introduction to the Mathematics of financial Derivatives
ISBN: 978-0123846822
2nd Edition
Authors: Salih N. Neftci
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