he previous section shows that we are going to work with ratios of stochastic
processes. We will repeatedly perform the
( Ito_formula)-based evaluation
of
and  
Hence, | | (Useful formula) |
Suppose the stochastic processes
and
are given by the
SDEs 
where the
terms are scalar products of columns. In terms of the SDE's coefficients we
obtain
Note, if
is a Brownian motion in a
 -numeraire
measure
then
It is informative to compare the last relationship with the
( Market prices of risk).
|
