Radon-Nikodym derivative and its dynamic [on hold]
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Let the process $S_{t}$ under the historical measure P be as following
$$dS_{t}=mu S_{t}dt+V_{t}S_{t}dW_{t}^{1}$$
$$dV_{t}=(a+d-bV_{t})dt+sigma(rho dW_{t}^{1}+sqrt{1-rho^2}dW_{t}^{2})$$
Let Q be risk-neutral measure
$$dS_{t}=r S_{t}dt+V_{t}S_{t}dhat{W}_{t}^{1}$$
$$dV_{t}=(a-bV_{t})dt+sigma(rho dhat{W}_{t}^{1}+sqrt{1-rho^2}d hat{W}_{t}^{2})$$
Find the $L_{t}=frac{dQ}{dP}$? And also find the dynamic of $L_{t}$.
stochastic-processes radon-nikodym
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Geoff Chen
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put on hold as off-topic by TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica yesterday
This question appears to be off-topic. The users who voted to close gave this specific reason:
- "This question is missing context or other details: Please improve the question by providing additional context, which ideally includes your thoughts on the problem and any attempts you have made to solve it. This information helps others identify where you have difficulties and helps them write answers appropriate to your experience level." – TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica
If this question can be reworded to fit the rules in the help center, please edit the question.
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up vote
1
down vote
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Let the process $S_{t}$ under the historical measure P be as following
$$dS_{t}=mu S_{t}dt+V_{t}S_{t}dW_{t}^{1}$$
$$dV_{t}=(a+d-bV_{t})dt+sigma(rho dW_{t}^{1}+sqrt{1-rho^2}dW_{t}^{2})$$
Let Q be risk-neutral measure
$$dS_{t}=r S_{t}dt+V_{t}S_{t}dhat{W}_{t}^{1}$$
$$dV_{t}=(a-bV_{t})dt+sigma(rho dhat{W}_{t}^{1}+sqrt{1-rho^2}d hat{W}_{t}^{2})$$
Find the $L_{t}=frac{dQ}{dP}$? And also find the dynamic of $L_{t}$.
stochastic-processes radon-nikodym
asked yesterday
Geoff Chen
61
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
put on hold as off-topic by TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica yesterday
This question appears to be off-topic. The users who voted to close gave this specific reason:
- "This question is missing context or other details: Please improve the question by providing additional context, which ideally includes your thoughts on the problem and any attempts you have made to solve it. This information helps others identify where you have difficulties and helps them write answers appropriate to your experience level." – TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica
If this question can be reworded to fit the rules in the help center, please edit the question.
add a comment |
up vote
1
down vote
favorite
up vote
1
down vote
favorite
Let the process $S_{t}$ under the historical measure P be as following
$$dS_{t}=mu S_{t}dt+V_{t}S_{t}dW_{t}^{1}$$
$$dV_{t}=(a+d-bV_{t})dt+sigma(rho dW_{t}^{1}+sqrt{1-rho^2}dW_{t}^{2})$$
Let Q be risk-neutral measure
$$dS_{t}=r S_{t}dt+V_{t}S_{t}dhat{W}_{t}^{1}$$
$$dV_{t}=(a-bV_{t})dt+sigma(rho dhat{W}_{t}^{1}+sqrt{1-rho^2}d hat{W}_{t}^{2})$$
Find the $L_{t}=frac{dQ}{dP}$? And also find the dynamic of $L_{t}$.
stochastic-processes radon-nikodym
asked yesterday
Geoff Chen
61
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Let the process $S_{t}$ under the historical measure P be as following
$$dS_{t}=mu S_{t}dt+V_{t}S_{t}dW_{t}^{1}$$
$$dV_{t}=(a+d-bV_{t})dt+sigma(rho dW_{t}^{1}+sqrt{1-rho^2}dW_{t}^{2})$$
Let Q be risk-neutral measure
$$dS_{t}=r S_{t}dt+V_{t}S_{t}dhat{W}_{t}^{1}$$
$$dV_{t}=(a-bV_{t})dt+sigma(rho dhat{W}_{t}^{1}+sqrt{1-rho^2}d hat{W}_{t}^{2})$$
Find the $L_{t}=frac{dQ}{dP}$? And also find the dynamic of $L_{t}$.
stochastic-processes radon-nikodym
stochastic-processes radon-nikodym
asked yesterday
Geoff Chen
61
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked yesterday
Geoff Chen
61
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked yesterday
Geoff Chen
61
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked yesterday
Geoff Chen
61
asked yesterday
Geoff Chen
61
61
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Geoff Chen is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
put on hold as off-topic by TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica yesterday
This question appears to be off-topic. The users who voted to close gave this specific reason:
- "This question is missing context or other details: Please improve the question by providing additional context, which ideally includes your thoughts on the problem and any attempts you have made to solve it. This information helps others identify where you have difficulties and helps them write answers appropriate to your experience level." – TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica
If this question can be reworded to fit the rules in the help center, please edit the question.
put on hold as off-topic by TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica yesterday
This question appears to be off-topic. The users who voted to close gave this specific reason:
- "This question is missing context or other details: Please improve the question by providing additional context, which ideally includes your thoughts on the problem and any attempts you have made to solve it. This information helps others identify where you have difficulties and helps them write answers appropriate to your experience level." – TheGeekGreek, 5xum, Davide Giraudo, Jens, Scientifica
If this question can be reworded to fit the rules in the help center, please edit the question.
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