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An equivalent martingale measure for S is a probability measure Q equivalent to P such that S is a (Q,F)-martingale

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An equivalent martingale measure is a probability measure under which the discounted asset prices are martingales. It is used to price financial derivatives and is essential in the theory of no-arbitrage pricing in mathematical finance. By changing the probability measure, it provides a new perspective on asset pricing.

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11mo ago
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Q: What is an equivalent martingale measure?
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