September 2009 Q8 Part (ii)

Discussion in 'CT8' started by Actu09, Apr 17, 2015.

  1. Actu09

    Actu09 Keen member

    I was wondering how did we come up with the solution obtained in the examiner's report..Any thoughts?
     
    Actu09, Apr 17, 2015
    #1
  2. Whippet1

    Whippet1 Member

    Hi,

    The formula for the state price deflator, At, in continuous time is stated (without proof) in the Core Reading at the top of page 19 in Chapter 16 of the Course Notes.

    Although it doesn't say so in the Core Reading, gamma in this formula is the market price of risk!
     
    Whippet1, Apr 19, 2015
    #2

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