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a) Consider the SDE dX, aXidt + √XidW₁ for X = (X)20. How should one choose a ER such that Ze is a martingale?

a) Consider the SDE dX, aXidt + √XidW₁ for X = (X)20. How should one choose a ER such that Ze is a martingale?

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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a) Consider the SDE dX; = aXidt + √XidW₁ for X = (X)20. How should one choose a ER such that Ze is a martingale? b) What is the variance of JtdW₁? e) Consider a Black-Scholes model with So 100 -0.05, 71, 00.1, 1. What is the price of a call option with strike K-105 ? T S
Transcribed Image Text:a) Consider the SDE dX; = aXidt + √XidW₁ for X = (X)20. How should one choose a ER such that Ze is a martingale? b) What is the variance of JtdW₁? e) Consider a Black-Scholes model with So 100 -0.05, 71, 00.1, 1. What is the price of a call option with strike K-105 ? T S
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