On the martingale property of certain local martingales (Q664349)

The authors consider local martingales that can be presented as stochastic integrals \(\int_0^tb(Y_u)dW_u\) with respect to Brownian motion. The main results are necessary and sufficient conditions for stochastic exponent of the local martingale to be a true martingale and to be a uniformly integrable martingale. The conditions are deterministic and expressed only in terms of the integrand function \(b\) and the drift and diffusion coefficient of the process \(Y\). The comparison with the previous similar results is given. Several examples and applications are considered. For instance, the application to financial bubbles is discussed.