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4

As with many things, particularly in machine learning and AI, I think you will find that these processes do not have a unique, logically or mathematically defined description. More so I would say that depending upon the context they can mean different things and might even mean the same thing. However, in my experience this is their most common usage. ...


5

Just to add to the answer by @KeSchn : There are at least two things going on here. First of all let $\{Q_i \}$ denote a set of equivalent probability measures, which includes your $P$ and $Q$ above. Any $F^i(t)$ defined as $F^i(t) = E_t^{Q_i} [P_T]$ will be a martingale by application of the tower law. With the definition above, it will not be the case ...


5

You probably wonder whether $\mathbb{E}^\mathbb{P}[P_T\mid\mathcal{F}_t]= \mathbb{E}^\mathbb{Q}[P_T\mid\mathcal{F}_t]$. Note the $T$ as index, i.e. the future unknown payoff and not the current price $P_t$. Now, why should $P_t$ be a martingale under both, $\mathbb{P}$ and $\mathbb{Q}$? Most likely, it is not. Indeed, the reason why you use $\mathbb{Q}$ in ...


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