Questions tagged [stochastic-drift]
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Risk Neutral Valuation, Drifts and Calibration
Lets consider a pricing model like Vasicek.
Apparently, if you calibrate a derivatives pricing model to market prices this gives you risk neutral parameters. Its not clear to me as to WHY this will ...
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Can a Process with a Stochastic Drift be a Martingale?
I have repeatedly come across the statement that "a process with a drift cannot be a martingale". Is this true also for stochastic drifts?
Suppose I have a process with a stochastic drift:
$$...
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