A class of stochastic volatility models and theq-optimal martingale measure

DOI10.1080/14697688.2011.568950MaRDI QIDQ2873538zbMATH OpenOpenAlexFDO

Authors Sotirios Sabanis

Publication date 24 January 2014

Published in Quantitative Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0808.3751

zbMATH Keywords

continuous-time modelscorrelationderivative pricing modelsmartingalesoption pricingstochastic volatility

Mathematics Subject Classification ID

Applications of stochastic analysis (to PDEs, etc.) (60H30) Stochastic models in economics (91B70) Derivative securities (option pricing, hedging, etc.) (91G20)

Abstract: This paper presents the general form and essential properties of the q-optimal measure following the approach of Delbaen and Schachermayer (1996) and proves its existence under mild conditions. Most importantly, it states a necessary and sufficient condition for a candidate measure to be the q-optimal measure in the case even of signed measures. Finally, an updated characterization of the q-optimal measure for continuous asset price processes is presented in the light of the counterexample appearing in Cerny and Kallsen (2006) concerning Hobson's (2004) approach.

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Cites work

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Cited in

(6)

• Stochastic volatility models at = 1 as second class constrained Hamiltonian systems
• A comparison of option prices under different pricing measures in a stochastic volatility model with correlation
• A simple proof of the martingale property in a semi-log-normal stochastic volatility model
• STOCHASTIC VOLATILITY MODELS, CORRELATION, AND THE q‐OPTIMAL MEASURE
• A COUNTEREXAMPLE CONCERNING THE VARIANCE‐OPTIMAL MARTINGALE MEASURE
• \(q\)-optimal martingale measures for discrete time models

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