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A change of measure formula for recursive conditional expectations
Published 16 Nov 2021 in math.PR, q-fin.MF, and q-fin.PR | (2111.08359v3)
Abstract: In this paper, we derive a representation for the value process associated to the solutions of FBSDEs in a jump-diffusion setting under multiple probability measures. Motivated by concrete financial problems, the latter representations are then applied to devise a generalization of the change of num\'eraire technique allowing to obtain recursive pricing formulas in the presence of multiple interest rates and collateralization.
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