Title of article :
On the Esscher transforms and other equivalent martingale measures for Barndorff-Nielsen and Shephard stochastic volatility models with jumps
Author/Authors :
Hubalek، نويسنده , , Friedrich and Sgarra، نويسنده , , Carlo، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2009
Abstract :
We compute and then discuss the Esscher martingale transform for exponential processes, the Esscher martingale transform for linear processes, the minimal martingale measure, the class of structure preserving martingale measures, and the minimum entropy martingale measure for stochastic volatility models of the Ornstein–Uhlenbeck type as introduced by Barndorff-Nielsen and Shephard. We show that in the model with leverage, with jumps both in the volatility and in the returns, all those measures are different, whereas in the model without leverage, with jumps in the volatility only and a continuous return process, several measures coincide, some simplifications can be made and the results are more explicit. We illustrate our results with parametric examples used in the literature.
Keywords :
Esscher martingale transform for stochastic processes , Option Pricing , Stochastic volatility models with jumps , Optimal martingale measures
Journal title :
Stochastic Processes and their Applications
Journal title :
Stochastic Processes and their Applications