The Minimal Entropy Martingale Measures for Exponential Additive Processes

Tsukasa Fujiwara ()

Asia-Pacific Financial Markets, 2009, vol. 16, issue 1, 65-95

Abstract: In this paper, we will consider exponential additive processes as a financial market model. Under a mild condition, we will determine the minimal entropy martingale measures (MEMMs) for the exponential additive processes. To this end, we will prepare several results on the exponential moment of additive processes and integrals based on them. As an application of our result, we will deduce optimal strategy for exponential utility maximization problem. We will also investigate our result through several examples, such as time-dependent versions of double Poisson model, Merton model and Kou model. Copyright Springer Science+Business Media, LLC. 2009

Keywords: Additive process; Exponential additive process; (Local) Martingale measure; Minimal entropy martingale measure; Exponential utility; Optimal strategy (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:kap:apfinm:v:16:y:2009:i:1:p:65-95

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DOI: 10.1007/s10690-009-9087-3

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