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jcjc0602
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Conditional Expectation

February 19th, 2013, 9:20 pm

Does anyone know how to compute E[X|X<x] when x is the sum of 2 random variables?Thanks!
 
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LocalVolatility
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Conditional Expectation

February 19th, 2013, 10:34 pm

What is X precisely? Do you know its density?
 
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jcjc0602
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Conditional Expectation

February 19th, 2013, 10:54 pm

one is discrete with a finite state and probability associated, and the other is a log normal RV.
 
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LocalVolatility
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Conditional Expectation

February 19th, 2013, 11:30 pm

So you are trying to price an option on a asset whose log is driven by a Brownian motion plus a compound Poisson process where the jumps can only take two possible values (like up x+% with probability p and down x-% with probability 1 - p)? Can you be more specific please?
Last edited by LocalVolatility on February 19th, 2013, 11:00 pm, edited 1 time in total.
 
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deimanteR
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Conditional Expectation

February 20th, 2013, 10:48 am

Try conditioning with respect to the finite state random variable.
 
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isometry
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Conditional Expectation

February 20th, 2013, 12:48 pm

E[x+y]=E[x]+E[y]