Piecewise linear processes with Poisson-modulated exponential switching times

Antonio Di Crescenzo, Barbara Martinucci, Nikita Ratanov

Research output: Contribution to journalArticlepeer-review

Abstract

We consider the jump telegraph process when switching intensities depend on external shocks also accompanying with jumps. The incomplete financial market model based on this process is studied. The Esscher transform, which changes only unobservable parameters, is considered in detail. The financial market model based on this transform can price switching risks as well as jump risks of the model.

Original languageEnglish (US)
Pages (from-to)4606-4626
Number of pages21
JournalMathematical Methods in the Applied Sciences
Volume42
Issue number13
DOIs
StatePublished - Sep 15 2019

All Science Journal Classification (ASJC) codes

  • Mathematics(all)
  • Engineering(all)

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