Business and Personal Finance Dictionary

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• EQUIVALENT MARTINGALE MEASURE
  
  Any probability measure (q.v.) that is "equivalent" (q.v.) to the true probability measure, and under which a random variable (q.v.) -- such as an asset price or the ratio of two asset prices -- is a martingale (q.v.). Application: In Arrow-Debreu equilibrium, there exists an equivalent martingale measure, under which the ratio of two asset prices is a martingale.
  
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