In this article we investigate the minimal entropy martingale measure for continuous-time Markov chains. The conditions for absence of arbitrage and existence of the minimal entropy martingale measure are discussed. Under this measure, expressions for the transition intensities are obtained. Differential equations for the arbitrage-free price are derived. © 2013 Applied Probability Trust.
CITATION STYLE
Lee, Y., & Rheinlander, T. (2013). The minimal entropy martingale measure for exponential markov chains. Journal of Applied Probability, 50(2), 344–358. https://doi.org/10.1239/jap/1371648945
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