Consider the price process (left(S_{t}ight)_{t in[0, T]}) given by [ frac{d S_{t}}{S_{t}}=r d t+sigma d B_{t} ]
Question:
Consider the price process \(\left(S_{t}ight)_{t \in[0, T]}\) given by
\[
\frac{d S_{t}}{S_{t}}=r d t+\sigma d B_{t}
\]
and a riskless asset valued \(A_{t}=A_{0} \mathrm{e}^{r t}, t \in[0, T]\), with \(r>0\). Compute the arbitrage-free price
\[
C\left(t, S_{t}ight)=\mathrm{e}^{-(T-t) r} \mathbb{E}^{*}\left[\log S_{T} \mid \mathcal{F}_{t}ight]
\]
at time \(t \in[0, T]\), of the \(\log\) contract with payoff \(\log S_{T}\).
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Related Book For
Introduction To Stochastic Finance With Market Examples
ISBN: 9781032288277
2nd Edition
Authors: Nicolas Privault
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