a Third workshop on Nonlinear PDEs and Financial Mathematics
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V. Myrnyy

A Shot Noise Model for Financial Assets

Ling Xu, University of Leipzig, Leipzig, Germany

Abstract
We propose a model for stock prices which allows for shot-noise effects. This means that abrupt changes caused by jumps may fade away as time goes by. This model is incomplete. We derive the minimal martingale measure in continuous time and discuss the associated hedging strategy. Finally, a simulation study is presented.