Timeline for Change of Numeraire technique (Cross-currency models)
Current License: CC BY-SA 4.0
3 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Nov 3, 2021 at 18:02 | comment | added | Mr.Price | Can we apply Ito's formula for $XB$ if $X$ and $B$ are written under different measures? Because $X$ is under measure $Q^1$ and foreign bank account $B$ is under measure $Q^2$. | |
| Nov 3, 2021 at 10:54 | comment | added | user34971 | Hint: Always try to identify your tradable assets. If $B$ is the money market account in EUR and $X$ is the exchange rate to USD, and you want to express everything in the USD risk neutral measure, then notice that $XB$ is a tradable asset in USD. Use Ito's formula on $XB$ given the dynamics of $X$ and $B$ and then see what transform you need to do to make the USD asset $XB$ drift less. | |
| Nov 2, 2021 at 21:33 | history | asked | Mr.Price | CC BY-SA 4.0 |