An <equivalent martingale measure> is a probability measure $\mathbb Q$ on the terminal sigma-algebra such that $\mathbb Q$ and the physical measure $\mathbb P$ are mutually absolutely continuous and every asset price discounted by the chosen <numéraire> is a $\mathbb Q$-martingale with respect to the market filtration.

Solution

Past exam of the mathematics course of the University of Cambridge / 2019 / ii / Paper 2 / 29K / a / Solution

 Solution (source code)