Analyze the characteristic exponent of the Kou-model of Problem 17.2. What is the proper drift adjustment to

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Analyze the characteristic exponent of the Kou-model of Problem 17.2. What is the proper drift adjustment to obtain the exponential Q-martingale Yt and is the necessary strip condition satisfied?

Problem 17.2

The double exponential jump-diffusion of Kou (2002) replaces the log-normal distributed jumps of the Merton-model, by Laplace-distributed ones, with probability density function

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and 0

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