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Problems and Solutions in Mathematical Finance: Stochastic Calculus, Volume I by Eric Chin, Sverrir Olafsson, Dian Nel

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5.2.4 Risk-Neutral Measure for Jump Processes

  1. 1. Simple Jump Process. Let c05-math-1695 be a probability space and let c05-math-1696 be a Poisson process with intensity c05-math-1697 relative to the filtration c05-math-1698, c05-math-1699. Suppose the asset price c05-math-1700 follows a simple jump process
    equation

    where c05-math-1701 is a constant jump amplitude if c05-math-1702 jumps at time c05-math-1703 and

    equation

    Let c05-math-1704 be the ...

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