학술저널
THE RELATIVE ENTROPY UNDER THE R-CGMY PROCESSES
- 충청수학회
- Journal of the Chungcheong Mathematical Society
- Volume 28, No. 1
-
2015.02109 - 117 (9 pages)
- 5
We consider the relative entropy for two R-CGMY processes, which are CGMY processes with Y equal to 1, to choose an equivalent martingale measure (EMM) when the underlying asset of a derivative follows a R-CGMY process in the financial market. Since the R-CGMY process leads to an incomplete market, we have to use a proper technique to choose an EMM among a variety of EMMs. In this paper, we derive the closed form expression of the relative entropy for R-CGMY processes.
1. Introduction
2. The R-CGMY process and its properties
3. The relative entropy for R-CGMY processes
4. Conclusion
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