Past exam of the mathematics course of the University of Cambridge / 2024 / iii / Paper 211 / 2 / b

The forward contract initiated at $t$ has payoff $S_T-F_t^T$ and zero value. Pricing under the T-forward measure givesBecause $F_t^T$ is ${\mathcal{F}}_t$-measurable and $B_t^T>0$,The tower property of conditional expectation therefore makes $(F_t^T{)}_{t<T}$ a $Q^T$-martingale.