Changes of Probability Measures in Finance and Insurance: A Synthesis
Revue Finance, Vol. 25, Special Issue, p. 95-120, 2004
25 Pages Posted: 7 Feb 2017
Date Written: 2004
In this paper, we study various ways of changing probability measures with applications to Finance and Insurance. Changes of numéraire and Esscher transforms are considered, just as pricing kernels which are, in a complementary direction, a means of keeping a privileged probability measure. These approaches are compared and new insights on them are given. We set ourselves in both a diffusive and a Lévy framework.
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