Pricing measures, forward measures and semigroups

Jinke Zhou and Xiaolu Wang

Quantitative Finance, 2009, vol. 9, issue 4, 411-416

Abstract: In a Markovian setting, we introduce a class of pricing measures and forward measures. Using multiplicative perturbation theory of Markovian semigroups, we study the relationship between the pricing semigroup and the forward semigroup, and obtain the forward semigroup pricing method. Furthermore, we investigate the derivatives pricing associated with the spot and forward generators.

Keywords: Arbitrage pricing; Derivatives pricing; Markov processes; Jump-diffusion processes (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1080/14697680802392504

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