A note on the existence of unique equivalent martingale measures in a Markovian setting (Q1267819)

In finance, the fair value of a derivative asset may be calculated as the mean value of the discounted payoff function under the equivalent martigale measure, provided this measure exists and is unique. In certain financial market models it is difficult or even impossible to show existence by standard conditions like the Novikov or Kazamaki condition. The author provides an alternative method for showing the existence of a unique equivalent martingale measure in a Markovian setup. This method rests on proving uniqueness in law of solutions to stochastic differential equations without drift. Two examples of financial market models where the stock price is driven by a hyperbolic or normal inverse Gaussian diffusion are considered. It is shown that a unique equivalent martigale measure exists up to an explosion time.