medium · Quantitative Finance
Under Girsanov's theorem, we define the market price of risk as θ = (μ - r)/σ.
If the asset's real-world drift μ were exactly equal to the risk-free rate r, what would be the resulting Radon-Nikod'ym derivative dQ/dP?
- ∞
- 0
- 1
- e^-rT
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