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## Saturday, June 13, 2015

### change of .. numeraire^measure

Advice: When possible, I would work with CoN rather than CoM. I believe once we identify another numeraire (say asset B) is useful, we just know there exists an equivalent measure associated with B (say measure J), so we could proceed. How to derive that measure I don't remember. Maybe there's a relatively simple formula, but very abstract.

In one case, we only have CoM, no CoN -- when changing from physical measure to risk neutral measure. There is no obvious, intuitive numeraire associated with the physical measure!

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CoN is more intuitive than CoM. Numeraire has a more tangible meaning than "measure".

I think even my grandma could understand 2 different numeraires and how to switch between them.  Feels like simple math.

CoM has rigorous math behind it. CoM is not just for finance. I guess CoM is the foundation and basis of CoN.

I feel we don't have to have a detailed, in-depth grasp of CoM to use it in CoN.