Option Pricing in Incomplete Markets: Modeling Based on Geometric Levy Processes and Minimal Entropy Martingale Measures

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World Scientific, 2011 - Business & Economics - 200 pages
This volume offers the reader practical methods to compute the option prices in the incomplete asset markets. The [GLP & MEMM] pricing models are clearly introduced, and the properties of these models are discussed in great detail. It is shown that the geometric L(r)vy process (GLP) is a typical example of the incomplete market, and that the MEMM (minimal entropy martingale measure) is an extremely powerful pricing measure. This volume also presents the calibration procedure of the [GLP \& MEMM] model that has been widely used in the application of practical problem
 

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Contents

1 Basic Concepts in Mathematical Finance
1
2 Levy Processes and Geometric Levy Process Models
7
3 Equivalent Martingale Measures
21
4 EsscherTransformed Martingale Measures
29
5 Minimax Martingale Measures and Minimal Distance Martingale Measures
41
6 Minimal Distance Martingale Measures for Geometric Levy Processes
47
7 The GLP MEMM Pricing Model
75
8 Calibration and Fitness Analysis of the GLP MEMM Model
99
9 The GSP MEMM Pricing Model
111
10 The MultiDimensional GLP MEMM Pricing Model
121
Appendix A Estimation
141
Bibliography
173
Index
181
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