Hi All,
From the Core Reading, I thought that the formula for the state price deflator consisted of both q from the risk neutral measure and p from the real world measure. For the April 2001 #6 question, they have q as 0.4 and p as 0.6, which would be under the real world measure. Why wasn't q derived from the risk neutral measure?
Thanks.
From the Core Reading, I thought that the formula for the state price deflator consisted of both q from the risk neutral measure and p from the real world measure. For the April 2001 #6 question, they have q as 0.4 and p as 0.6, which would be under the real world measure. Why wasn't q derived from the risk neutral measure?
Thanks.