Equivalent and absolutely continuous measure changes for jump-diffusion processes
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Abstract: We provide explicit sufficient conditions for absolute continuity and equivalence between the distributions of two jump-diffusion processes that can explode and be killed by a potential.
From the authors' introduction: The paper's main result gives sufficient conditions for the distribution of two jump-diffusions to be equivalent or absolutely continuous. The formulation of the main theorem involves two sequences of stopping times. Stopping times of the first sequences stop the process before it explodes. The second sequence consists of exit times of the process from the region in the state space where the transformation of the first generator into the second one can be controlled. Finally the main result is illustrated by showing how the characteristics of a Cox-Ingersoll-Ross short rate process with additional jumps and a potential can be altered by an absolutely continuous or equivalent change of measure. For a related paper see: \textit{J. C. Cox, J. E. Ingersoll jun.} and \textit{S. A. Ross} [Econometrica 53, 363--384 (1985; Zbl 0576.90006)].
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