Martingale representation processes and applications in the market viability under information flow expansion

DOI10.1051/PROC/201756111zbMATH Open1383.60036arXiv1505.00560OpenAlexW2963823878MaRDI QIDQ4606387FDOQ4606387

Authors: Shiqi Song 

Publication date: 7 March 2018

Published in: ESAIM: Proceedings and Surveys (Search for Journal in Brave)

Abstract: When the extit{martingale representation property} holds, we call any local martingale which realizes the representation a extit{representation process}. There are two properties of the extit{representation process} which can greatly facilitate the computations under the extit{martingale representation property}. Actually, on the one hand, the extit{representation process} is not unique and there always exists a extit{representation process} which is locally bounded and has pathwisely orthogonal components outside of a predictable thin set. On the other hand, the jump measure of a extit{representation process} satisfies the extit{finite predictable constraint}. In this paper, we give a detailed account of these two properties. As application, we will prove that, under the extit{martingale representation property}, the extit{full viability} of an expansion of market information flow implies the extit{drift multiplier assumption}.

Full work available at URL: https://arxiv.org/abs/1505.00560

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zbMATH Keywords

martingale representation propertydrift multiplier assumptionmarket information flow

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Financial applications of other theories (91G80)

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Cited In (2)

• Filtration shrinkage, the structure of deflators, and failure of market completeness
• Martingale representations in progressive enlargement by the reference filtration of a semi-martingale: a note on the multidimensional case

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