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# Questions tagged [radon-nikodym]

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### The Radon-Nikodym derivative for a sequence of dependent variables

Suppose that a probability space $(\Omega, \Sigma, \mathbb{P})$ is given. Let $W=\{W_n\}_{n\in \mathbb{N}_0}$ be a sequence of $\mathbb{P}$-i.i.d real-valued random variables on $\Omega$. Furthermore, ...
• 419
2 votes
0 answers
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### Are Stochastic Differential Equation diffusion terms always invariant under a change of measure?

I'm struggling with learning change of numeraire, and stochastic differential equations. I'm reading the beginning of Brigo and Mercurio's Interest Rate Models- Theory and Practice, and I'm on the ...
7 votes
0 answers
186 views

### Let $\mathbb{P} \sim \mathbb{Q} \sim \mathbb{R}$ be equivalent probability measures on some measurable space

Let $\mathbb{P} \sim \mathbb{Q} \sim \mathbb{R}$ be equivalent probability measures on some measurable space $(\Omega, \mathcal{F})$, and let $\mathcal{G} \subset \mathcal{F}$ be a sub- $\sigma$-...
• 383
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### Association between a random variable and Radon-Nikodym derivative

Suppose that $X$ is a random variable and $\frac{d\mathbb{Q}}{d\mathbb{P}}$ is the Radon-Nikodym derivative. The quantity under consideration is as follows: Cov(X, \frac{d\mathbb{Q}}{...
• 419
3 votes
1 answer
562 views

### What is the Radon-Nikodym derivative in the Heston model?

It is clear to me that $$\frac{dQ}{dP} = e^{-\lambda W_T-\frac{\lambda^2}{2}T}$$ is the Radon-Nikodym derivative that defines the change of measure in the framework described by Black and Sholes. But ...
• 233
2 votes
0 answers
245 views

### Understanding Bayes Rule of conditional expectation

Let $\mathcal{F}$ be a $\sigma$-algebra, $P$ and $Q$ be equivalent martingale measures and $\frac{dQ}{dP}$ the Radon Nikodym Derivative. I learned that $\Bbb{E}_Q[X]=\Bbb{E}_P[\frac{dQ}{dP}X]$, which ...
1 vote
0 answers
54 views

### Change of numeraire between t1-forward mesure and t2-forward mesure

Let denote $\mathbb{Q}_{t_1}$ the $t_1$-forward mesure associated to zero coupon bond $B(.,t_1)$. Let denote $\mathbb{Q}_{t_2}$ the $t_2$-forward mesure associated to zero coupon bond $B(.,t_2)$. I am ...
• 338
5 votes
1 answer
686 views

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