Prove that the out turn covariance between xT log(ST F(0, T )) and rT is given by where This result neatly demonstrates the essential difference between lo cal correlation and implied correlation (fr...

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Prove that the out turn covariance between xT log(ST F(0, T )) and rT is given by where This result neatly demonstrates the essential difference between lo cal correlation and implied correlation (from a Libor equity outperformance option, for example) in stochastic rate problems Cov(xT, TT) e k(T ...

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Prove that the out-turn covariance between xT = log(ST /F(0, T )) and rT is given by

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The Value Of Uncertainty Dealing With Risk In The Equity Derivatives Market

Prove that the out-turn covariance between xT = log(ST /F(0, T )) and rT is given by

Question:

Cov(xT, TT) = {e-k(T-t) [EG(k,t,T) pos(t)] dt

Step by Step Answer:

The Value Of Uncertainty Dealing With Risk In The Equity Derivatives Market

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