# Questions tagged [girsanov]

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### What happens trying to price derivatives starting from a non-geometric brownian motion?

To get a better understanding, I tried going through BSM-model starting from a non-geometric brownian motion. However, during the derivation I got stuck, which led me to a specific question. The set-...
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### Where does the term $\gamma$ come from when moving from measure $\mathbb Q^{N}$ to $\mathbb Q^{M}$?

Consider two measures $\mathbb Q^{M}$ and $\mathbb Q^{N}$, as well as the two numéraires $M$ and $N$, furthermore assume that $X\frac{N}{M}$ is a $\mathbb Q^{M}$-martingale. Furthermore, the ...
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Girsanov's theorem provides the measure transformation from probability measure P to Q such that- $dW_t^Q=dW_t^P+\lambda dt\implies \xi_tW_t^Q$ is a martingale under the P measure where \xi_t=e^{-\... • 392 0 votes 1 answer 401 views ### Equivalent Martingale Measure result Hull? I've been reading Hull's chapter about Martingales and measures where he states that if you have the dynamics of two securities as follows: \begin{align} \frac{df}{f} = (r + \lambda \sigma_f) dt + \... • 282 4 votes 0 answers 557 views ### Girsanov theorem and stopping time Let(\Omega,\mathcal{F},\mathbb{P})$be a probability space, equipped with a filtration$(\mathcal{F})_{0 \leq t \leq T}$which is a natural filtration of a standard Brownian motion$(W_{t})_{0 \leq ...
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In the pricing of a European swaption, it is common to use the annuity factor $A(t)$ as the Numeraire. I was trying to write down the pricing formula via the bank account as numeraire to see if they ...