A change of measure formula for recursive conditional expectations

Luca Di Persio, Alessandro Gnoatto and Marco Patacca

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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.

Date: 2021-11, Revised 2022-07
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