In the model of Section 23.4, define X = , Y = 2
Question:
In the model of Section 23.4, define X = μ −θ
γ , Y =
σ
2 − θ
σ
t + logC
σ .
Write down the innovation process, filtering equation, and ODE for the conditional variance of X. Explain why these imply (23.43)–(23.46).
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