Finance and Stochastics

, Volume 7, Issue 4, pp 509–531 | Cite as

The minimal entropy martingale measures for geometric Lévy processes

  • Tsukasa Fujiwara
  • Yoshio Miyahara
Original Paper

Abstract.

The minimal entropy martingale measures (MEMMs) for geometric Lévy processes are investigated. It is shown that, under a quite mild condition, the MEMMs can be defined and furthermore represented explicitly. Furthermore, it is shown that the MEMM price is the limit of the utility indifference price as the risk aversion parameter tends to 0.

Key words: Geometric Lèvy processes, (local) martingale measures, minimal entropy martingale measures, Esscher transformation, utility indifference price 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Tsukasa Fujiwara
    • 1
  • Yoshio Miyahara
    • 2
  1. 1.Department of Mathematics, Hyogo University of Teacher Education, Yashiro, Hyogo 673-1494, Japan (e-mail: tsukasa@sci.hyogo-u.ac.jp) JP
  2. 2. Faculty of Economics, Nagoya City University, Nagoya 467-8501, Japan (e-mail: miyahara@econ.nagoya-cu.ac.jp) JP

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