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On changes of measure in stochastic volatility models

Wong, Bernard; Heyde, C C


Pricing in mathematical finance often involves taking expected values underdifferent equivalent measures. Fundamentally, one needs to first ensure the existence of ELMM, which in turn requires that the stochastic exponential ofthe market price of risk process be a true martingale. In general, however, this condition can be hard to validate, especially in stochastic volatility models. This had led many researchers to "assume the condition away," even though the condition is not innocuous, and...[Show more]

CollectionsANU Research Publications
Date published: 2006
Type: Journal article
Source: Journal of Applied Mathematics and Stochastic Analysis
DOI: 10.1155/JAMSA/2006/18130


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