Question: Question: Change-of-measure process. Let dXt = utdt + otdBt be an Ito process and define Mt = exp - asdBs - 2 ads , at

Question:

Change-of-measure process. Let dXt = utdt + otdBt be an Ito process and define Mt = exp - asdBs - 2 ads , at = Mt / ot , o where Be is a one-dimensional Brownian motion. (a) Show that Me is a local martingale, meaning it has an SDE representation dMt = BidBt for some Bt (i.e., there is no drift term). (b) Show that Yt := MtXt is a local martingale

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