Giacomini, Enzo (contributor); Härdle, Wolfgang (contributor) - 2008
distribution of ST is defined as
QST|St=st([ST ≤x]) def.=
integraldisplay x
−∞
Ktpi(st,·) dPST|St=st (3.1)
where PST|St=st is the … conditional distribution of ST under St = st. Special-
izing to the following two factor model we assume that the price process …
risk neutral distribution QST|St=st has a density function denoted by qt,T(·|st).
Hence, the call prices C can be expressed …