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The minimal entropy martingale measure of a jump process influenced by jump times

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  • Yan, Jun
  • Gao, Fuqing

Abstract

In this article, we consider the problem of the minimal entropy martingale measure of a jump process influenced by jump times. The minimal entropy martingale measure of the price process is given out by the exponential martingale method, and the expression of the corresponding relative entropy is also obtained.

Suggested Citation

  • Yan, Jun & Gao, Fuqing, 2013. "The minimal entropy martingale measure of a jump process influenced by jump times," Statistics & Probability Letters, Elsevier, vol. 83(1), pages 83-88.
  • Handle: RePEc:eee:stapro:v:83:y:2013:i:1:p:83-88
    DOI: 10.1016/j.spl.2012.09.001
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    References listed on IDEAS

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    1. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    2. Esche, Felix & Schweizer, Martin, 2005. "Minimal entropy preserves the Lévy property: how and why," Stochastic Processes and their Applications, Elsevier, vol. 115(2), pages 299-327, February.
    3. Thomas Goll & Ludger Rüschendorf, 2001. "Minimax and minimal distance martingale measures and their relationship to portfolio optimization," Finance and Stochastics, Springer, vol. 5(4), pages 557-581.
    4. Marco Frittelli, 2000. "The Minimal Entropy Martingale Measure and the Valuation Problem in Incomplete Markets," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 39-52.
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    Cited by:

    1. Yan, Jun, 2017. "Deviations and asymptotic behavior of convex and coherent entropic risk measures for compound Poisson process influenced by jump times," Statistics & Probability Letters, Elsevier, vol. 125(C), pages 71-79.

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