The relations between Minimal Martingale Measure and Minimal Entropy Martingale Measure

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We consider incomplete markets, where each risky asset fluctuation is a continuous semimartingale, and study a subset of Equivalent Local Martingale Measures in which Minimal Martingale Measure minimizes relative entropy. We also discuss, as special cases, some models with the risky asset fluctuation represented as a solution of some stochastic differential equations. Finally, we mention that the predictable representation property is essential in order that Minimal Martingale Measure coincides with Minimal Entropy Martingale Measure.

Original languageEnglish
Pages (from-to)167-177
Number of pages11
JournalAsia-Pacific Financial Markets
Volume8
Issue number2
Publication statusPublished - 2001

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Fluctuations
Minimal martingale measure
Assets
Minimal entropy martingale measure
Relative entropy
Semimartingale
Incomplete markets
Stochastic differential equations
Martingale measure

Keywords

  • Incomplete markets
  • Minimal entropy martingale measure
  • Minimal martingale measure
  • Predictable representation property

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

The relations between Minimal Martingale Measure and Minimal Entropy Martingale Measure. / Arai, Takuji.

In: Asia-Pacific Financial Markets, Vol. 8, No. 2, 2001, p. 167-177.

Research output: Contribution to journalArticle

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