On martingale measures and pricing for continuous bond-stock market with stochastic bond

This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a numéraire. It is shown that the presence of arbitrarily small stochastic deviations in the evolution of the numéraire process causes significant changes in the market properties. In particular, an equivalent martingale measure is not unique for this market, and there are non-replicable claims. The martingale prices and the hedgi...