Solution

ID: past-exam-of-the-probability-statistics-and-options-ii-course-of-the-university-of-oxford/2008/p/3/a/solution

Define . Positive definiteness gives nonnegativity and separation of zero, and bilinearity gives absolute homogeneity. Cauchy–Schwarz follows by minimizing the nonnegative quadratic in real . It then gives , establishing the triangle inequality. Thus this is a norm.

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