BFS 2002 

Contributed Talk 
Yuan Gao, Kian Guan Lim, Kah Hwa Ng
We consider the arbitragefree equilibrium pricing problem in an incomplete market. We provide a method to find the minimal distance measure defined by Goll and R\"{u}schendorf (2001) or the maximum entropy measure over a finite dimensional subset of the set of all equivalent martingale measures. We use the cross entropy to measure the pseudodistance between two equivalent martingale measures. We interpret the cross entropy as model risk and prove that it induces a Riemannian geometric structure. A numerical optimization algorithm on the Riemannian manifold is applied to solve the pricing problem.