Monoyios, Michael (2007) The minimal entropy measure and an Esscher transform in an incomplete market model. Statistics and Probability Letters, 77 . pp. 10701076.
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Abstract
We consider an incomplete market model with one traded stock and two correlated Brownian motions ,. The Brownian motion drives the stock price, whose volatility and Sharpe ratio are adapted to the filtration generated by . We show that the projections of the minimal entropy and minimal martingale measures onto are related by an Esscher transform involving the correlation between ,, and the meanvariance tradeoff process. The result leads to a new formula for the marginal exponential utilitybased price of an measurable European claim.
Item Type:  Article 

Subjects:  O  Z > Probability theory and stochastic processes 
Research Groups:  Mathematical and Computational Finance Group 
ID Code:  623 
Deposited By:  Professor Michael Monoyios 
Deposited On:  06 Jul 2007 
Last Modified:  29 May 2015 18:25 
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The minimal entropy measure and an Esscher transform in an incomplete market model. (deposited 11 Jan 2006)
 The minimal entropy measure and an Esscher transform in an incomplete market model. (deposited 06 Jul 2007) [Currently Displayed]
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