he measure associated with the
is called the
measure". It is particularly useful when evaluating a price of a derivative.
Indeed, the regular risk neutral measure corresponds to the defined above, see
Hence, the transformation to the T-forward measure moves the discounting
outside of the expectation term.
Suppose an asset
and the riskless bond
are given by the
with respect to the risk neutral measure. Here
are correlated increments of the standard Brownian
We perform transformation of the SDEs to the T-forward measure. The old
and the new numeraire is
Hence, according to the formula (
), the drift of
is increment of the standard Brownian motion with respect to the