Dominated families of martingale, supermartingale and quasimartingale laws

DOI10.1016/0304-4149(96)00073-7MaRDI QIDQ1272172zbMATH OpenOpenAlexFDO

Authors Marco Frittelli

Publication date 23 November 1998

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

Full work available at URL https://doi.org/10.1016/0304-4149(96)00073-7

zbMATH Keywords

equivalent probability measurequasimartingale lawsemimartingale

Mathematics Subject Classification ID

Signal detection and filtering (aspects of stochastic processes) (60G35) Martingales with continuous parameter (60G44)

Review text

The paper deals with two types of tamed (i.e. absolutely continuous with respect to its selected element) sets of probabilities on a probability space \((\Omega ,\mathcal F,P)\). The first type is formed by sets of probabilities \(Q << P\) such that a given convex set \(K\) of \(P\)-a.s. finite random variables (space \(L^{0}(\Omega ,\mathcal F,P)\)) has a uniformly finite \(Q\)-expectation. Such a set of probabilities contains an element equivalent to \(P\) if and only if a certain spanning condition (C) in the space \(L^{0}(\Omega ,\mathcal F,P)\) is satisfied. The second type contains probability sets which consist of quasi-, semi-, {super-,} sub- or simply martingale laws for an at most countable family \(\chi \) of adapted stochastic processes, i.e. sets of probabilities under which all members of \(\chi \) are quasi-, \dots , -martingales. It is shown that the second type set is also of the first type, provided that \(K\) is generated by stochastic integrals over \(\chi \), the integrands being elementary predictable processes with an additional property. Thus, a characterization of quasi-, \dots , -martingales is obtained, with an application to securities markets with frictions. An equivalent quasi-, \dots , -martingale measure exists on such a market if and only if there are no extreme arbitrage opportunities, a condition equivalent to (C).

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Cites work

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• scientific article; zbMATH DE number 3432917 (Why is no real title available?)
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Cited in

(2)

• On the existence of an equivalent supermartingale density for a fork-convex family of stochastic processes
• MINIMAL ENTROPY–HELLINGER MARTINGALE MEASURE IN INCOMPLETE MARKETS

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