On jump-difusion processes with regime switching: Martingale approach Academic Article

abstract

  • We study jump-diffusion processes with parameters switching at random times. Being motivated by possible applications, we characterise equivalent martingale measures for these processes by means of the relative entropy. The minimal entropy approach is also developed. It is shown that in contrast to the case of Lévy processes, for this model an Esscher transformation does not produce the minimal relative entropy.

publication date

  • 2015/1/1

keywords

  • Entropy
  • Equivalent Martingale Measure
  • Jump Process
  • Jump-diffusion Process
  • Lévy Process
  • Martingale
  • Model
  • Regime Switching
  • Relative Entropy

International Standard Serial Number (ISSN)

  • 1980-0436

number of pages

  • 24

start page

  • 573

end page

  • 596