The Minimal Entropy Martingale Measure (MEMM) for a Markov-Modulated Lévy Model

This paper deals with the characterization problem of the minimal entropy martingale measure (MEMM) for a Markov-modulated exponential Lévy model. This model is characterized by the presence of a factor modulating the risky asset price movements between different regimes. We circumvent the difficulty caused by the modulator factor by using the special properties of Markov additive process. Our work generalizes some previous works in the literature which have treated either the exponential Lévy case or the exponential-additive case