Adaptive prediction and reverse martingales

DOI10.1016/0304-4149(92)90059-YMaRDI QIDQ1201889zbMATH OpenOpenAlexFDO

Publication date 17 January 1993

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

Full work available at URL https://doi.org/10.1016/0304-4149(92)90059-y

information inequalities optimal predictor prediction sufficiency reverse martingale

Prediction theory (aspects of stochastic processes) (60G25) Martingales with continuous parameter (60G44) Markov processes (60J99) Inference from stochastic processes and prediction (62M20)

Review text

The authors study the following problem: Given \(t\) and a stochastic process \(X\) one wants to find a good predictor of \(\Phi(X_ T)\) based on the information \(F^ X_ t\), where \(\Phi\) is a function and \(T>t\). They introduce the notion of a prediction sufficiency. They show that if \(f(t,X_ t)\) is a prediction sufficient process with some optimality properties, then \(f(t,X_ t)\) is a reverse martingale with respect to the filtration \(G_ t^ X=\sigma\{X_ s:s\geq t\}\). The authors compute the optimal predictor in some examples (diffusion processes, Poisson processes) and give explanations for the irregular behaviour of the optimal predictor in these examples. They finish the paper by giving some information inequalities.

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