On jump-diffusion processes with regime switching: martingale approach

zbMATH Open1331.60170arXiv1508.04533MaRDI QIDQ3465401FDOQ3465401

Authors: Antonio Di Crescenzo, Nikita Ratanov 

Publication date: 21 January 2016

Abstract: We study jump-diffusion processes with parameters switching at random times. Being motivated by possible applications, we characterise equivalent martingale measures for these processes by means of the relative entropy. The minimal entropy approach is also developed. It is shown that in contrast to the case of L'evy processes, for this model an Esscher transformation does not produce the minimal relative entropy.

Full work available at URL: https://arxiv.org/abs/1508.04533

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zbMATH Keywords

martingalesrelative entropyjump-diffusion processjump-telegraph processfinancial modeling

Mathematics Subject Classification ID

Diffusion processes (60J60) Martingales with continuous parameter (60G44) Financial applications of other theories (91G80)

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• New measure selection for Hunt-Devolder semi-Markov regime switching interest rate models
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• Equivalent measure changes for subordinate diffusions
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• Value functions in a regime switching jump diffusion with delay market model
• Feynman–Kac formulas for regime-switching jump diffusions and their applications
• Analysis of a class of price process models with jump
• Some results on the telegraph process driven by gamma components
• On the Esscher transforms and other equivalent martingale measures for Barndorff-Nielsen and Shephard stochastic volatility models with jumps
• Risk-neutral measures and pricing for a pure jump price process
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• Two-time-scale Jump-Diffusion Models with Markovian Switching Regimes

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