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Supermartingale ( 1 0 points ) Assume asset price S k , k = 0 , 1 , cdots, N follows an N - period
Supermartingale points
Assume asset price cdots, follows an period binomial model, the hedging
process for the American put option is
where is the hedging ratio and is the amount consumed at time Please refer to the
lecture notes for the details of explanation of hedging process Show that the discounted
value of is a supermartingale under the riskneutral probability measure.
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