| Summary: | We consider an incomplete market model with one traded stock and two correlated Brownian motions W, over(W, ̃). The Brownian motion W drives the stock price, whose volatility and Sharpe ratio are adapted to the filtration over(F, ̃) {colon equals} (over(F, ̃)t)0 ≤ t ≤ T generated by over(W, ̃). We show that the projections of the minimal entropy and minimal martingale measures onto over(F, ̃)T are related by an Esscher transform involving the correlation between W, over(W, ̃), and the mean-variance trade-off process. The result leads to a new formula for the marginal exponential utility-based price of an over(F, ̃)T-measurable European claim. © 2007 Elsevier B.V. All rights reserved.
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