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This article deals with the following problem: Given a signal process \(Z\), that is a Brownian martingale, how to construct a process \(X\) such that \(Z_1\) is equal to \(X_1\) and \(X\) is a martingale in its own filtration? The construction given here is mainly based on nonlinear filtering techniques and also leads to semimartingale decompositions of \(X\) w.r.t. its own filtration and the joint filtration of \(X\) and \(Z\). The motivation for this topic comes from the theory of probability on the one hand and finance on the other hand. First it generalizes earlier results by using very different techniques and second it can be used in the modeling of insider trading. | |||
Property / review text: This article deals with the following problem: Given a signal process \(Z\), that is a Brownian martingale, how to construct a process \(X\) such that \(Z_1\) is equal to \(X_1\) and \(X\) is a martingale in its own filtration? The construction given here is mainly based on nonlinear filtering techniques and also leads to semimartingale decompositions of \(X\) w.r.t. its own filtration and the joint filtration of \(X\) and \(Z\). The motivation for this topic comes from the theory of probability on the one hand and finance on the other hand. First it generalizes earlier results by using very different techniques and second it can be used in the modeling of insider trading. / rank | |||
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Property / Mathematics Subject Classification ID: 60G44 / rank | |||
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Property / Mathematics Subject Classification ID: 93E11 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91G80 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60H05 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60H10 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 5918973 / rank | |||
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Property / zbMATH Keywords | |||
Markovian bridge | |||
Property / zbMATH Keywords: Markovian bridge / rank | |||
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martingale problem | |||
Property / zbMATH Keywords: martingale problem / rank | |||
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nonlinear filtering | |||
Property / zbMATH Keywords: nonlinear filtering / rank | |||
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insider trading | |||
Property / zbMATH Keywords: insider trading / rank | |||
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Property / MaRDI profile type | |||
Property / MaRDI profile type: MaRDI publication profile / rank | |||
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Property / OpenAlex ID | |||
Property / OpenAlex ID: W3022586523 / rank | |||
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Property / arXiv ID | |||
Property / arXiv ID: 1202.2980 / rank | |||
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links / mardi / name | links / mardi / name | ||
Latest revision as of 07:06, 4 July 2024
scientific article
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English | Dynamic Markov bridges motivated by models of insider trading |
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Dynamic Markov bridges motivated by models of insider trading (English)
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8 July 2011
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This article deals with the following problem: Given a signal process \(Z\), that is a Brownian martingale, how to construct a process \(X\) such that \(Z_1\) is equal to \(X_1\) and \(X\) is a martingale in its own filtration? The construction given here is mainly based on nonlinear filtering techniques and also leads to semimartingale decompositions of \(X\) w.r.t. its own filtration and the joint filtration of \(X\) and \(Z\). The motivation for this topic comes from the theory of probability on the one hand and finance on the other hand. First it generalizes earlier results by using very different techniques and second it can be used in the modeling of insider trading.
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Markovian bridge
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martingale problem
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nonlinear filtering
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insider trading
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