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Let r >0, consider the following stochastic differential equation dXt = (r. 2 Xt + 2r(r -1)Xt)dt + 2rXedBt, XO = X, with = >
Let r >0, consider the following stochastic differential equation dXt = (r. 2 Xt + 2r(r -1)Xt)dt + 2rXedBt, XO = X, with = > 0. 1. Find the process Xt. 2. Let f(x) = (x - K)', for some K > 0. Compute the expectation Elf(Xt)]
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