The relative entropy in CGMY processes and its applications to finance |
| |
Authors: | Young Shin Kim Jeong Hyun Lee |
| |
Institution: | (1) Department of Mathematics, Sogang University, Seoul, 121-742, South Korea;(2) Courant Institute, 251 Mercer Street, New York, NY 10012, USA |
| |
Abstract: | The CGMY market model generates infinite equivalent martingale measures (EMM). In order to price options, we need an adequate
method to choose one EMM. This paper presents the relative entropy for CGMY processes, and apply it to choosing an EMM called
the model preserving minimal entropy martingale measure.
|
| |
Keywords: | Incomplete market CGMY process Relative entropy Esscher transform Minimal entropy martingale measure |
本文献已被 SpringerLink 等数据库收录! |
|