New measure selection for Hunt–Devolder semi-Markov regime switching interest rate models

In this paper we construct the minimal entropy martingale for semi-Markov regime switching interest rate models using some general entropy measures. We prove that, for the one-period model, the minimal entropy martingale for semi-Markov processes in the case of the Tsallis and Kaniadakis entropies are the same as in the case of Shannon entropy.

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Year of publication:	2014
Authors:	Preda, Vasile ; Dedu, Silvia ; Sheraz, Muhammad
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 407.2014, C, p. 350-359
Publisher:	Elsevier
Subject:	Binomial option pricing \| Semi-Markov process \| Regime switching \| Martingale measure \| Tsallis entropy \| Kaniadakis entropy

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010777055