A note on the forward measure
AbstractFor a Markov process $x_t$, the forward measure $P^T$ over the time interval $[0,T]$ is defined by the Radon-Nikodym derivative $dP^T/dP = M\exp(-\int_0^Tc(x_s)ds)$, where $c$ is a given non-negative function and $M$ is the normalizing constant. In this paper, the law of $x_t$ under the forward measure is identified when $x_t$ is a diffusion process or, more generally, a continuous-path Markov process.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 2 (1997)
Issue (Month): 1 ()
Note: received: October 1996; final version received: July 1997
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Web page: http://www.springerlink.com/content/101164/
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
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