=+7.9. Suppose that W. = 1, so that F. = F. + S ,. Suppose that p2
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=+7.9. Suppose that W. = 1, so that F. = F. + S ,. Suppose that p2 q and ₸ is a stopping time such that 1 ≤+ ≤n with probability 1. Show that E[F,] ≤ E[F ,, ], with equality in case p = q. Interpret this result in terms of a stock option that must be exercised by time n, where Fo + S, represents the price of the stock at time k.
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Probability And Measure Wiley Series In Probability And Mathematical Statistics
ISBN: 9788126517718
3rd Edition
Authors: Patrick Billingsley
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