Questions tagged [equivalent-measure]
The equivalent-measure tag has no usage guidance.
5
questions
6
votes
0answers
60 views
Can the risk-neutral measure depend on the option type?
In an ideal Black-Scholes setting, the Risk-Neutral measure $Q$ is unique and so, obviously, does not depend on what derivative instrument we want to price.
Assume some deviation from perfect markets (...
1
vote
1answer
66 views
We have a two LIBOR contracts, how to compare their values by change of change of numeraire
We have two LIBOR contracts:
contract 1 pays $L\left(T_{1},\:T_{2}\right)-K$ at time $T_{1}$
contract 2 pays $L\left(T_{1},\:T_{2}\right)-K$ at time $T_{2}$.
Now, $F_{1}$ is the par strike such that ...
1
vote
0answers
43 views
Replicating portfolio of an option and to find inital price
I am very new to financial math so I am not sure how to do with this question. A friend sent me this question to practice but I am unsure how to begin. I read about call option . Can that be used for ...
2
votes
0answers
71 views
Last step step in Girsanov's theorem proof
I consider the version of Girsanov's theorem presented in this question.
Let us take the particular case that $\mathbb{F}$ is the filtration generated by standard Brownian motion $(W)_{t\in[0;T]}$ ...
2
votes
1answer
91 views
Market Price of Risk for Consumption Asset - Hull's Example 28.1
In Hull's Options, Futures, and Other Derivatives, he gives an example 28.1 as below.
Consider a derivative whose price is positively related to the price
of oil and depends on no other ...
