Past exam of the martingales and financial mathematics course of the University of Oxford / 2008 / B / 5 / c / Solution

The stochastic differential computed above isThus this positive no-dividend traded claim behaves as a new geometric Brownian motion asset withThe transformed drift need not be positive, even though the three original market parameters were assumed positive. Under the risk-neutral measure it becomes $r$, as it must for a non-dividend traded asset.