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 language||English (US)|
|Number of pages||24|
|Journal||Alea (Rio de Janeiro)|
|State||Published - 2015|
All Science Journal Classification (ASJC) codes
- Statistics and Probability