Geometric Lévy Process Pricing Model

June 2, 2017 | Autor: Yoshio Miyahara | Categoría: Applied Mathematics, Pure Mathematics, Financial Derivatives, Financial Market, Levy Process
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Descripción

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