Defining new variables give the process followed by s

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Reference no: EM131241006

The variable S is an investment asset providing income at rate q measured in currency A. It follows the process

in the real world. Defining new variables as necessary, give the process followed by S, and the corresponding market price of risk, in:

(a) A world that is the traditional risk-neutral world for currency A

(b) A world that is the traditional risk-neutral world for currency B

(d) A world that is forward risk neutral with respect to a zero coupon currency B bond maturing at time T.

Reference no: EM131241006

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