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CT8 September 2017 5 (iii)

Discussion in 'CM2' started by Janboyd, Mar 3, 2019.

  1. Janboyd

    Janboyd Member

    When determining the SDE of St I can't see where the '- lambda sigma term' comes from. The report says change the Brownian motion and the probability measure using the CMG theorem. I can get there working backwards because I know the drift must be 0 but I don't think thats the right way to go about it. Please could someone explain further?
     
    Janboyd, Mar 3, 2019
    #1
  2. Furiously_treading_water

    Furiously_treading_water Active Member

    I did ask the same question when taking CT8 a little while ago. If I recall, lambda is a typo and shouldn't be there. Drop Cm2@bpp.com an email and hopefully they can send you a correct solution.
     
    Furiously_treading_water, Mar 3, 2019
    #2

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