" to the physical probability measure P, where closeness is measured in terms of relative entropy. In this paper, we … determine the minimal entropy martingale measure in a market where securities are traded with payoffs depending on two types of … these risks are independent under the entropy measure. Moreover, in such a market the entropy measure of the combined …

Key Features:Unique focus on hedging and optimal martingale measuresIncludes new developments about static and dynamic … hedging schemesTreatment of popular models for asset prices like exponential Lévy processes and stochastic volatility models. …Intro -- Contents -- Preface -- 1. Introduction -- 1.1 Hedging in complete markets -- 1.1.1 Black & Scholes analysis …