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Optimal martingale measures for defaultable assets
Authors:Young Lee,Thorsten Rheinlä  nder
Affiliation:Department of Statistics, London School of Economics, Houghton Street, London, WC2A 2AE, United Kingdom
Abstract:We model a defaultable asset as solution to a stochastic differential equation driven by both a Brownian motion and the counting process martingale associated to the one-jump process. We discuss in this framework the minimal entropy martingale measure as well as the linear Esscher and the minimal martingale measure. In particular we deal with some rather delicate verification issues.
Keywords:Defaultable assets   Incomplete markets   Martingale measures   Minimal entropy martingale measure
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