Optimal Skorokhod embedding given full marginals and Azéma-Yor peacocks

DOI10.1214/16-AAP1191MaRDI QIDQ2013566zbMATH OpenOpenAlexFDO

Authors Sigrid Källblad, Xiaolu Tan, Nizar Touzi

Publication date 8 August 2017

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1503.00500, https://projecteuclid.org/euclid.aoap/1495764364

zbMATH Keywords

martingale inequalitypeacocksmartingale transport problemoptimal Skorokhod embedding

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Martingales with continuous parameter (60G44)

Abstract: We consider the optimal Skorokhod embedding problem (SEP) given full marginals over the time interval $[0,1]$. The problem is related to the study of extremal martingales associated with a peacock ("process increasing in convex order", by Hirsch, Profeta, Roynette and Yor). A general duality result is obtained by convergence techniques. We then study the case where the reward function depends on the maximum of the embedding process, which is the limit of the martingale transport problem studied in Henry-Labordere, Obloj, Spoida and Touzi. Under technical conditions, some explicit characteristics of the solutions to the optimal SEP as well as to its dual problem are obtained. We also discuss the associated martingale inequality.

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