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JOURNALS // Trudy Matematicheskogo Instituta imeni V.A. Steklova // Archive

Trudy Mat. Inst. Steklova, 2002 Volume 237, Pages 185–200 (Mi tm330)

This article is cited in 3 papers

Geometric Lévy Process Pricing Model

Y. Miyaharaa, A. Novikovb

a Faculty of Economics, Nagoya City University, Mizuhochou, Mizuhoku, Nagoya
b Department of Mathematical Sciences, University of Technology, Sydney

Abstract: We consider models for stock prices that relate to random processes with independent homogeneous increments (Lévy processes). These models are arbitrage-free but correspond to an incomplete financial market. There are many different approaches for pricing financial derivatives. We consider here mainly the approach based on minimal relative entropy. This method is related to a utility function of exponential type and the Esscher transformation of probabilistic measures.

UDC: 519.2+519.8

Received in November 2001

Language: English


 English version:
Proceedings of the Steklov Institute of Mathematics, 2002, 237, 176–191

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