Let Z(t),t 0, be the standard Brownian process, f (t) and g(t) be differentiable functions over

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Let Z(t),t ≥ 0, be the standard Brownian process, f (t) and g(t) be differentiable functions over [a,b]. Show that

b E[f* f' (1)IZ(1) - Z(a)] di ["g' (1)[Z (1) - Z(a)] di a a b = [156- a [f(b) f(t)][g(b) g(t)] dt.

Interchange the order of expectation and integration, and observe

E[[Z(t)- Z(a)][Z(s) - Z(a)]] = min(t, s) - a.

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Mathematical Models Of Financial Derivative

ISBN: 9783642447938

2nd Edition

Authors: Yue-Kuen Kwok

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Question Posted: Dec 02, 2023 03:16 AM

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Let Z(t),t 0, be the standard Brownian process, f (t) and g(t) be differentiable functions over

Question:

b E[ f* ƒ'(0)[Z(1) - Z(a)] di ["g' (1)[Z(1) — Z(a)] di - a a ·b = [₁156- a [f(b) f(t)][g(b) – g(t)] dt. —

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Lets show that Zt Zadt f g1 Zt Zadl b t9b9tdi We can start by intercha...View the full answer

Mathematical Models Of Financial Derivative

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