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Change of Numeraire
Stockholm School of Economics.
2010 (English)In: Encyclopedia of Qunatitative Finance / [ed] Rama Cont, John Wiley & Sons, 2010Chapter in book (Other academic)
Abstract [en]

We give an overview of the change of numeraire technique and in particular the concept of T-forward measure. For a general numeraire, we provide the Radon-Nikodym derivative for the associated measure transformation and derive a general option pricing formula. A pricing formula for an exchange option is given as an example.

Place, publisher, year, edition, pages
John Wiley & Sons, 2010.
Keyword [en]
change of numeraire; Girsanov transformation; exchange option; maximum option; option pricing formula
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-86647DOI: 10.1002/9780470061602.eqf04010ISBN: 9780470057568ISBN: 0470057564OAI: diva2:500889
QC 20120420Available from: 2012-02-13 Created: 2012-02-13 Last updated: 2012-04-20Bibliographically approved

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Björk, Tomas
Economics and Business

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