An optimal Skorokhod embedding for diffusions

DOI10.1016/J.SPA.2004.01.003MaRDI QIDQ2485750zbMATH OpenOpenAlexFDO

Authors David Hobson, Alexander Matthew Gordon Cox

Publication date 5 August 2005

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0212174

zbMATH Keywords

Brownian motionSkorokhod problemEmbeddingStopping time\(H^p\)-embedding

Mathematics Subject Classification ID

Diffusion processes (60J60) Brownian motion (60J65) Martingales with continuous parameter (60G44)

Abstract: Given a Brownian motion $B_t$ and a general target law $mu$ (not necessarily centered or even integrable) we show how to construct an embedding of $mu$ in $B$. This embedding is an extension of an embedding due to Perkins, and is optimal in the sense that it simultaneously minimises the distribution of the maximum and maximises the distribution of the minimum among all embeddings of $mu$. The embedding is then applied to regular diffusions, and used to characterise the target laws for which a $H^p$-embedding may be found.

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Cited in

(14)

• Discretisation and duality of optimal Skorokhod embedding problems
• On joint distributions of the maximum, minimum and terminal value of a continuous uniformly integrable martingale
• Optimal Skorokhod embedding given full marginals and Azéma-Yor peacocks
• Cautious stochastic choice, optimal stopping and deliberate randomization
• Finite, integrable and bounded time embeddings for diffusions
• Designing options given the risk: The optimal Skorokhod-embedding problem
• Integrability of solutions of the Skorokhod embedding problem for diffusions
• An explicit solution to the Skorokhod embedding problem for functionals of excursions of Markov processes
• Skorokhod embeddings, minimality and non-centred target distributions
• Optimal stopping of the maximum process: a converse to the results of Peskir
• Statistical Skorohod embedding problem: optimality and asymptotic normality
• Processes that can be embedded in a geometric Brownian motion
• Stopping with expectation constraints: 3 points suffice
• Numerical approximation of irregular SDEs via Skorokhod embeddings

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