Change of expected value under equivalent probability measures and use of surrogate assets

Change of expected value under equivalent probability measures and use of surrogate assets Maciej Klimek Change of expected value under equivalent probability measures and use of surrogate assets We prove an elementary theorem showing to what extent the expected value of a random variable driven by two independent random variables changes as a result of switching to a new equivalent probability measure. The result provides a simple probabilistic explanation of the phenomenon of arbitrariness of pricing based on surrogate assets, first observed by Hubalek and Schachermayer (2001). It also sheds some light on the use of risk-neutral valuation in incomplete markets.