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If X t is the logarithm of a tradable asset, then f is the exponential function f (x) = e x . In the simple
If Xt is the logarithm of a tradable asset, then f is the exponential function f(x) = ex. In the simple case where t = and t = are constants (the basic Black-Scholes model).
- Write down an expression of the market price of risk for tradables
- Write down an expression of the corresponding risk-neutral SDE for Xt
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