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Binomial Model

Discussion in 'CM2' started by Jia Syuen, May 7, 2019.

  1. Jia Syuen

    Jia Syuen Very Active Member

    Hi there.
    In the chapter of binomial model (pg.8),

    "Note, by convention E_Q[Y|F_0] is sometimes rotten as E_Q[Y}"

    I would like to know what is Y and F_0 here. Thanks in advance.
     
    Jia Syuen, May 7, 2019
    #1
  2. Calm

    Calm Ton up Member

    F₀ is the filtration of the risk-neutral process i.e. information set generated by history of stock price movements up to and including time zero
    Y is the derivative value, stock price or any other process which may be dependent on past information
     
    Calm, May 8, 2019
    #2
    Jia Syuen and Anna Bishop like this.

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