Work

The minimal entropy martingale measure for general Barndorff-Nielsen/Shephard models

Year: 2006

Type: article

Abstract: We determine the minimal entropy martingale measure for a general class of stochastic volatility models where both price process and volatility process contain jump terms which are correlated. This generalizes previous studies which have treated either the geometric Lévy case or continuous price processes with an orthogonal volatility process. We proceed by linking the entropy measure to a certain semi-linear integro-PDE for which we prove the existence of a classical solution.

Source: The Annals of Applied Probability

DOI: 10.1214/105051606000000240

Authors: Thorsten Rheinländer, Gallus Steiger

Institutions: ETH Zurich, London School of Economics and Political Science

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

OpenAlex ID: W1551623652

FWCI: 3.97

Cites: 25

Cited by: 21

Related to: 10