The role of measurability in game-theoretic probability

Stopping times; optimal stopping problems; gambling theory (60G40) Other game-theoretic models (91A40) Actuarial science and mathematical finance (91G99)

Abstract: This paper proposes new get-rich-quick schemes that involve trading in a financial security with a non-degenerate price path. For simplicity the interest rate is assumed zero. If the price path is assumed continuous, the trader can become infinitely rich immediately after it becomes non-constant (if it ever does). If it is assumed positive, he can become infinitely rich immediately after reaching a point in time such that the variation of the log price is infinite in any right neighbourhood of that point (whereas reaching a point in time such that the variation of the log price is infinite in any left neighbourhood of that point is not sufficient). The practical value of these schemes is tempered by their use of the Axiom of Choice.

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The author considers game-theoretic probability which is an alternative of the measure-theoretic probability allowing us to state and prove results free of statistical assumptions. In game-theoretic probability, measurability is usually not needed in discrete time (and is never assumed). The paper however shows that in continuous time some assumptions of regularity (such as Borel- or universal measurability) should be imposed even in game-theoretic probability. This is not a serious problem in applications since only computable trading strategies can be of practical interest, and computable trading strategies will be measurable under any reasonable computational model.

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