Timeline for Does every process need to be a martingale under martingale measure?
Current License: CC BY-SA 4.0
6 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Oct 18, 2022 at 17:19 | vote | accept | user2743931 | ||
| Oct 18, 2022 at 17:19 | comment | added | user2743931 | Thanks, I accept the solution and I even expected that the 'asset' is the keyword that was needed. Pity that books don't have these kind of counterexamples to explain which processes under $Q$ actually don't need to be martingales and why. | |
| Oct 18, 2022 at 14:06 | comment | added | Kevin | As @KurtG says it’s really about tradable assets. Interest rates, variances and some commodities are not directly tradable and thus they don’t need to be martingales after discounting. | |
| Oct 18, 2022 at 7:44 | comment | added | Kurt G. | An asset is something you can buy and sell for a price that is nonnegative. Examples are bonds, stocks, foreign currency, commodities. BTW: the martingale requirement applies only when the asset does not pay dividends. When it does see this answer. | |
| Oct 18, 2022 at 6:43 | comment | added | user2743931 | Yes, that's something I understand. But how is 'asset' defined? Is it a positive price process? It feels to easy to say $r$ is not an asset. I'm looking for the arguments behind. | |
| Oct 17, 2022 at 23:55 | history | answered | dm63 | CC BY-SA 4.0 |