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The Pricing Measure for Geometric Levy Processes under Incomplete Financial Markets
Journal of Financial Studies
View Archive Info| Field | Value | |
| Title |
The Pricing Measure for Geometric Levy Processes under Incomplete Financial Markets
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| Creator |
Hwai-Chung Ho
Tsun-Siou Lee Hung-Chou Tsai |
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| Description |
In this paper, Esscher transformation is applied to construct a martingale measure in the framework of geometric Levy process. By means of a relation between exponential Levy process and stochastic exponential of Levy process, it is shown that a Levy process is a martingale if and only if its stochastic exponential is a martingale. While Esche and Schweizer (2005) offer the sufficient condition for the Esscher measure to be the minimal entropy martingale measure, we provide the necessary condition for the statement to be true based on the above result. Key words: minimal entropy martingale measure, exponential Levy process, stochastic exponential of Levy process |
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| Publisher |
Journal of Financial Studies
財務金èžå¸åˆŠ |
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| Date |
2011-03-10
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| Type |
—
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| Format |
application/pdf
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| Identifier |
http://www.jfs.org.tw/index.php/jfs/article/view/2011058
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| Source |
Journal of Financial Studies; Vol 17, No 1 (2009); 107
財務金èžå¸åˆŠ; Vol 17, No 1 (2009); 107 |
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| Language |
—
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