Minimal \(f^q\)-Martingale measures for exponential Lévy processes (Q2475035)

The paper considers multidimensional Lévy process as a model of the stock price on the financial market. Since such market is incomplete, the question arises which measure one should choose for valuation or pricing of nonhedgeable payoffs. The \(f^q\)-minimal martingale measure \(Q_q\) is defined as that equivalent martingale measure which minimizes \(f^q\)-divergence \(E[(dQ/dP)^q]\) for fixed \(q\in (-\infty,0)\cup (1,\infty)\).Structure of such measure is studied, necessary and sufficient conditions for its existence are formulated and explicit formula for its density is deduced. The relationship between \(Q_q\) and the minimal entropy martingale measure \(P_e\) is discussed. More precisely, it is shown that under some technical assumptions \(Q_q\) converges to \(P_e\) as \(q \searrow 1\).