Changes of probability measure in finance and insurance : A synthesis

This paper studies 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 mean of keeping a privileged probability measure. These approach...

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Bibliographic Details
Published inFinance (Paris) no. 25; pp. 95 - 120 P.
Main Authors Le Courtois, Olivier, Quittard-Pinon, François
Format Journal Article
LanguageEnglish
Published Association Française de Finance (AFFI) / Presses universitaires de Grenoble 01.12.2004
Subjects
Business administration
Economics and Finance
Humanities and Social Sciences
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ISSN0752-6180
2101-0145

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Summary:This paper studies 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 mean of keeping a privileged probability measure. These approaches are compared and new insights on them are given. This article gives a unifying point of view and makes a synthesis on the subject.
ISSN:0752-6180
2101-0145