Non-stopping times and stopping theorems (Q875907)

Let \(M= (M_t)\) be a uniformly integrable martingale with respect to a filtration \(({\mathcal F}_t)\) (satisfying the usual hypotheses) and let \(T\) be an \(({\mathcal F}_t)\)-stopping time. Then \[ E[M_T]= E[M_\infty]= E[M_0]\tag{1} \] and \[ E[M_\infty\mid{\mathcal F}_T]= M_t.\tag{2} \] The author deals with the problem what happens to (1) and (2) if \(T\) is replaced by a random time \(\rho\), and \({\mathcal F}_T\) is replaced by \({\mathcal F}_\rho:=\sigma\{H_\rho: H\) is \(({\mathcal F}_t)\)-optional\}. Random times play a key role in various contexts such as in the modeling of default times in mathematical finance, see, e.g., \textit{R. J. Elliott}, \textit{M. Jeanblanc} and \textit{M. Yor} [Math. Finance 10, No. 2, 179--196 (2000; Zbl 1042.91038)] or as honest times (e.g., the last zero of the standard Brownian motion before a fixed time). Instead of (1) and (2) one can consider (for a given random time \(\rho\)) the following conditions on \(M\): \[ E[M_\rho]= E[M_0]\tag{3} \] and \[ E[M_\infty\mid{\mathcal F}_\rho]= M_\rho.\tag{4} \] The author studies for a given random time \(\rho\) the sets \[ {\mathcal S}_1:= \{M\in{\mathcal H}^1:M\text{ satiesfies }(3)\}\quad\text{and}\quad{\mathcal S}_2:= \{M\in{\mathcal H}^1: M\text{ satisfies }(4)\}. \] In the present paper, a characterization of the \(L^2\)-martingales \(M\in{\mathcal S}_1\) is given. Furthermore a characterization of all \(M\in{\mathcal H}^1\) which belong to \({\mathcal S}_2\) is obtained, provided \(\rho\) is an honest time \(L\) satisfying \(P(L= T)= 0\) for all \(({\mathcal F}_t)\)-stopping times \(T\).