$F$-divergence minimal equivalent martingale measures and optimal portfolios for exponential Levy models with a change-point
Portfolio Management
2018-03-14 v3 Probability
Abstract
We study exponential Levy models with change-point which is a random variable, independent from initial Levy processes. On canonical space with initially enlarged filtration we describe all equivalent martingale measures for change-point model and we give the conditions for the existence of f-divergence minimal equivalent martingale measure. Using the connection between utility maximisation and -divergence minimisation, we obtain a general formula for optimal strategy in change-point case for initially enlarged filtration and also for progressively enlarged filtration in the case of exponential utility. We illustrate our results considering the Black-Scholes model with change-point.
Keywords
Cite
@article{arxiv.1004.3525,
title = {$F$-divergence minimal equivalent martingale measures and optimal portfolios for exponential Levy models with a change-point},
author = {S. Cawston and L. Vostrikova},
journal= {arXiv preprint arXiv:1004.3525},
year = {2018}
}
Comments
31 pages, no figures