On jump-diffusion processes with regime switching: Martingale approach

Antonio di Crescenzo, Nikita Ratanov

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

We study jump-diffusion processes with parameters switching at random times. Being motivated by possible applications, we characterise equivalent martingale measures for these processes by means of the relative entropy. The minimal entropy approach is also developed. It is shown that in contrast to the case of Lévy processes, for this model an Esscher transformation does not produce the minimal relative entropy.

Original languageEnglish (US)
Pages (from-to)573-596
Number of pages24
JournalAlea (Rio de Janeiro)
Volume12
Issue number2
StatePublished - 2015

All Science Journal Classification (ASJC) codes

  • Statistics and Probability

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