Exercise 7.7
Consider the American corporation ACME INC. The price process S for ACME is of course denoted in US$ and has the P-dynamics
where a and σ are known constants. The currency ratio SEK/US$ is denoted by Y and Y has the dynamics
in SEK. Here Z(t) is the price at time t in SEK of the ACME stock.
Compute the arbitrage free price (in SEK) at time t of a T-Euler, given that the price (in SEK) of the ACME stock is z. The Swedish short rate is denoted by r.
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