The relative entropy in CGMY processes and its applications to finance

The CGMY market model generates infinite equivalent martingale measures (EMM). In order to price options, we need an adequate method to choose one EMM. This paper presents the relative entropy for CGMY processes, and apply it to choosing an EMM called the model preserving minimal entropy martingale measure. Copyright Springer-Verlag 2007

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Year of publication:	2007
Authors:	Kim, Young ; Lee, Jeong
Published in:	Computational Statistics. - Springer. - Vol. 66.2007, 2, p. 327-338
Publisher:	Springer
Subject:	Incomplete market \| CGMY process \| Relative entropy \| Esscher transform \| Minimal entropy martingale measure

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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