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Quantitative Finance · Glossary

What is Novikov’s condition?

Definition 5.1 Quantitative Methods · Chapter 5 — Girsanov and Changes of Numeraire

An adapted process γ\gamma satisfies Novikov’s condition on [0,T][0, T] if E[exp⁡(12∫0Tγs2 ds)]<∞\E[\exp(\tfrac12\int_0^T\gamma_s^2\,ds)] < \infty.

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