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Esscher transforms and the minimal entropy martingale measure for exponential Levy models

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  • Friedrich Hubalek
  • Carlo Sgarra

Abstract

In this paper we offer a systematic survey and comparison of the Esscher martingale transform for linear processes, the Esscher martingale transform for exponential processes, and the minimal entropy martingale measure for exponential Levy models, and present some new results in order to give a complete characterization of those classes of measures. We illustrate the results with several concrete examples in detail.

Suggested Citation

  • Friedrich Hubalek & Carlo Sgarra, 2006. "Esscher transforms and the minimal entropy martingale measure for exponential Levy models," Quantitative Finance, Taylor & Francis Journals, vol. 6(2), pages 125-145.
    • Handle: RePEc:taf:quantf:v:6:y:2006:i:2:p:125-145
    DOI: 10.1080/14697680600573099
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    References listed on IDEAS

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