Let Y be a random variable with E[Y] < (a) Show that the Mt defined by
Question:
E[Y] < ∞
(a) Show that the Mt defined by
Mt = E[Y|It]
Is a martingale.
(b) Does this mean that every conditional expection is a martingale given the increasing sequence of information sets {T0 ≤ . . . It ≤ I t + I . . .}
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a If M t E YI t then by the law of iterated expectatio...View the full answer
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Related Book For
An Introduction to the Mathematics of financial Derivatives
ISBN: 978-0123846822
2nd Edition
Authors: Salih N. Neftci
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