Rheinlander, Thorsten and Steiger, Gallus
The minimal entropy martingale measure for general Barndorff-Nielsen/Shephard models.
Annals of Applied Probability, 16
We determine the minimal entropy martingale measure for a general class of stochastic volatility models where both price process and volatility process contain jump terms which are correlated. This generalizes previous studies which have treated either the geometric Lévy case or continuous price processes with an orthogonal volatility process. We proceed by linking the entropy measure to a certain semi-linear integro-PDE for which we prove the existence of a classical solution.
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