A complete characterization of local martingales which are functions of Brownian motion and its maximum (Q2642799): Difference between revisions

A local martingale \((N_t)\) (\(t\geq 0)\) is called max-martingale or simply \(M\)-martingale if there is a function \(H:\mathbb R\times\mathbb R_+\to\mathbb R\) such that \(N_t=H(N_t, \sup_{s\leq t}N_s)\) \((t\geq 0)\). Such processes were first considered in a paper by \textit{J. Azéma} and \textit{M. Yor} [Sémin. Probab. XIII, Lect. Notes Math. 721, 90--115 (1979; Zbl 0414.60055)]. In the present paper it is shown that if \((N_t)\) is continuous, then \(H(N_t,\sup_{s\leq t} N_s)\) \((t\geq 0)\) is a local martingale iff there exists a locally integrable function \(f\) such that \[ H(x,y)=\int^y_0f(s)\,ds -f(y)(x-y)+H(0,0). \] Via Lévy's equivalence theorem, an analogous result holds with the maximum process replaced by the local time at \(0\).