Sunday, September 1, 2019

stochastic calculus - How to use the stock as a numeraire to price a derivative with payoff of the form (STf(ST))+?


I have dStSt=rdt+σdWt as usual under the money-market numéraire and I need to price options with payoffs


(STf(ST))+


How do I express the stock dynamics using the stock as numéraire, and how do I get the stock distribution under the equivalent measure.




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