medium · Quantitative Finance stochastic
Determine if the process X_t = exp(σ W_t - α t) is a martingale, and if so, identify the required value for α.
- It is a martingale only if α is exactly zero.
- It is a martingale if α = (1)/(2)σ^2
- It is never a martingale for any real value of α whatsoever.
- It is a martingale if α equals σ^2, twice the required drift term.
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