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Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 10th, 2003, 3:27 pm
by surfasaurus
Anybody!Who knows a book or an article or any other publication with (detailed and not trivial!) expository examples of measure change use for derivatives valuatioin?Thank you!
Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 10th, 2003, 11:32 pm
by Pat
Surely Hull's book uses the level numeraire to price swaptions!
Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 11th, 2003, 9:09 am
by surfasaurus
Pat,You are absolutely right, that is correct that Hull's book provides examples, thank you!But that is not the mathematical level we are looking for.
Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 12th, 2003, 1:48 pm
by dS
Baxter & Rennie
Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 12th, 2003, 2:04 pm
by Martingale
I am sure Bjork's book has this treatment, as well as a paper by Geman. Cannot remember if Lamperton's book has it ( it was 4 years ago I read it, not sure about )
Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 12th, 2003, 2:06 pm
by elan
I think the original paper by Geman, El Karoui, and Rochet "Changes of Numeraire, Changes of Probability Measures, and Option Pricing", Journal of Applied Probability, 32, 443 - 458 (1995), is an excellent entry point to the methodology. It has a large number of examples of how the technique works, and the explanations are very clear and detailed.
Girsanov, Radon Nikodym, Equivalent Measures, Numeraire
Posted: September 13th, 2003, 10:42 am
by surfasaurus
Elan, Martingale, thank you for your suggestions!