November 1998
Intermediate to advanced
220 pages
6h 36m
English
Content preview from Fixed Income and Interest Rate Derivative Analysis
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150 FIXED INCOME AND INTEREST RATE DERIVATIVE ANALYSIS
11.3
Martingales
A martingale is a process which provides a mathematical characterization
of a 'fair' game. It is a process for which the expected future value is simply
the current value. That is a process
Mt
such that
Et[Mt] - mr, T> t
A process is
adapted
to the filtration generated by a Wiener process if its
random value at time t can be determined from the history of the Weiner
process up to that time. If
Bt
is an adapted process for t in (0, T), then the
process
dMt - Bt dWt
is a martingale (leaving aside ...
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