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The minimal entropy martingale measure for general Barndorff-Nielsen/Shephard models

Thorsten Rheinländer·Gallus Steiger
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Abstract

We determine the minimal entropy martingale measure for a general class of stochastic volatility models where both price process and volatility process contain jump terms which are correlated. This generalizes previous studies which have treated either the geometric L\'{e}vy case or continuous price processes with an orthogonal volatility process. We proceed by linking the entropy measure to a certain semi-linear integro-PDE for which we prove the existence of a classical solution.

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Thorsten Rheinländer, Gallus Steiger. 2006-10-06. The minimal entropy martingale measure for general Barndorff-Nielsen/Shephard models. https://doi.org/10.1214/105051606000000240

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