In this paper, we deal with the pricing of European style options when the dynamics of the risky underlying asset are driven by a Markov-modulated jump diffusion with stochastic volatility. We investigate the Radon–Nikodym derivative for the minimal martingale measure and a partial...

We develop a theory of local risk minimization for payment processes in discrete time, and apply this theory to the pricing and hedging of equity-linked life-insurance contracts. Thus, we extend the work of Møller (2001a) in several directions: from risk minimization (which is done under a...

We propose different schemes for option hedging when asset returns are modeled using a general class of GARCH models. More specifically, we implement local risk minimization and a minimum variance hedge approximation based on an extended Girsanov principle that generalizes Duan׳s (1995) delta...

In this paper we offer a systematic survey and comparison of the Esscher martingale transform for linear processes, the Esscher martingale transform for exponential processes, and the minimal entropy martingale measure for exponential Levy models, and present some new results in order to give a...